From Chinese Press

Spare a thought for SMEs

(China Daily)
Updated: 2011-02-24 09:09

The People's Bank of China has raised the reserve ratio twice and interest rates once this year. This indicates that macro-policies will be tightened to control liquidity because of inflationary fears. But such policies should take into consideration the condition of small- and medium-sized enterprises (SMEs), too, says an article in Jiefang Daily. Excerpts:

For the economy as a whole, a moderate inflation is not that bad, but when governments at all levels start trying every possible means to control liquidity, inflation or inflationary fears must have reached alarming proportions.

The government should thus take special measures to keep down inflation and minimize the impact of policies to control liquidity in the market on SMEs.

Overheating of the economy has had an impact on companies of different sizes at different speed and to different extents.

Though many large companies and booming sectors have shown obvious signs of overheating, some SMEs are still to feel the heat. If macro-policies are tightened further, these SMEs may become the first to feel a totally opposite kind of heat, that is, fear of melting out of business.

A tight monetary policy will dry up the liquidity of social funds, which may harm the real economy, especially SMEs. Every time interest rates are raised, the capital costs of SMEs rise, too, and their loans keeping piling up.

Besides, SMEs are badly in need of money and will be the first to suffer if the monetary policy is tightened, because it will dry up loans.

SMEs are an important part of the national economy, for they create jobs and promote the country's development. But they are still the most vulnerable in the industrial chain. Hopefully, the government will pay more attention to their needs when it adjusts the macro-policies.