China's SMEs struggling for land and private capital(2)

LACK OF LAND

The lack of sufficient land is another pain for the heads of China's SMEs, which are trying to edge each other out for precious and limited land in various cities in China to build industrial parks.

"The Foxconn company asked us for 10,000 mu (about 667 hectares) of land to build their industrial park here, but we were just unable to provide it to them," said Luo Huazhong, director of the development and reform commission of Guangxi's Yulin City.

Luo said the problem is shared by many other companies, as land resources are limited and it has been quite difficult for local governments to acquire land.

"Take Guangxi for example. Each year we need about 30,000 hectares of land for new large projects in the region, but only 12,000 hectares can be allocated by the central government," said the official.

Insufficient land resources have restricted the number of incoming projects, and companies have to pay deposits to reserve the limited land, he added.

To help SMEs tackle the difficulties, local governments in China have put forward various preferential policies to offer support, but such efforts seem to have been in vain.

Chinese SMEs had mediocre performance in the eyes of Forbes: only 63 such companies (including some from Hong Kong) were listed in the top 200 small- and medium-sized public companies in Asia -- the lowest number in five years.

Despite the flat performance, experts believe that there is still potential to be tapped in the future growth of such companies, but new measures are required to tame the financial market and manage land that is occupied but never used.

Zuo Xiaolei, chief consultant to the president of China Galaxy Securities Co., Ltd., said that the government should assign private banks to serve local SMEs by proving financial support, which is a way to optimize the allocation of financial resources.

Zuo's idea was echoed by Yuan Chiping, who argued that a government-guided platform needs to be established with designated financial institutions.

"In this way, private capital will flow into SMEs more smoothly via the platform, while the companies are supervised by local governments on the platform," said Yuan.

When it comes to the urgent need for land, Jin Tao, an economist from Xiamen University, said that governments should set the bar high when they draw investments so that precious land resources could be used more effectively.

"It is a smart idea to invite high-tech and environmentally friendly companies that occupy less soil and make best use of the local advantages," Jin said.

Jin added that a land reclamation mechanism should be in place to manage the idle land and put it to use where it is most needed.