A possible economic recession in the United States is creating anxiety among small and medium-sized enterprises (SMEs) in Asia, a survey by UPS showed yesterday.

While 38 percent of the SMEs surveyed on the mainland are worried about the negative impact of an economic slowdown in the US, more than half of SMEs in Hong Kong, Taiwan, Singapore and Indonesia are concerned their businesses will be hampered, the survey found.

US courier UPS yesterday released its Asia Business Monitor 2008, an annual survey conducted on competitiveness of and issues facing SMEs in Asia. UPS surveyed 1,201 decision-makers of SMEs between Dec 18, 2007 and Jan 24, 2008.

Since its launch in 2005, the survey has been conducted annually to deliver the latest insight into the changing business needs of SMEs, defined as companies with fewer than 250 employees.

SMEs make up 60 percent of China's GDP and generate more than half of the country's tax revenues. They also provide 75 percent of the employment in urban areas.

The survey found most SMEs expect trade with North America to decrease significantly in the current economic climate. Only 39 percent expect trade with the US to grow, compared with 51 percent in 2007. But 71 percent of the SMEs believe intra-Asia trade will remain robust.

"SMEs would be increasingly aware of the importance of lowering risk by diversifying trade partners. They should look at trade within Asia and with the Middle East," said Sebastian Chan, UPS China's vice-president for supply chain operations.

The survey found a sentiment of caution pervading Asian SME leaders. Fewer SMEs are projecting regional economic growth compared with last year. But they expect China and India will still see robust economic growth.

Chinese SMEs said inflation and overheating are the biggest threats to the country's sustainable growth.

Many SMEs are anxious about their own business outlook, competitiveness and workforce growth. More than half of the SMEs polled do not plan to hire or are considering reducing their headcount, indicating they may be bracing for a tougher business environment.

While last year's survey indicated product and service quality was what SMEs in Asia cared most about, this year they are most concerned about retaining qualified staff.

Lack of qualified employees and innovation are the biggest challenges for Chinese SMEs to improve their competitiveness, the survey said.

SMEs in China were regarded as the most competitive in Asia for the fourth consecutive year, as recognized by the majority, or 62 percent, of the SMEs polled.

Almost two-thirds of Taiwan SMEs believe the island's companies should maximize opportunities on the mainland, and 74 percent of SMEs in Hong Kong feel the special administrative region should continue to integrate economically with the mainland, the survey showed.