Enterprises' business conditions worsen in Q1

Chinese enterprises experienced worsening business conditions in the first quarter of this year, and enterprise owners are cautiously optimistic about the prospects in the second quarter, a survey conducted by the China Entrepreneurs Survey System (CESS) showed over the weekend.

Only 41.3 percent of the surveyed enterprises made a profit in the first quarter, mainly scattered across mining, transport and storage sectors, while 34.4 percent reported losses, most of which are in agriculture, power and software industries.

The quarterly survey covers 1,349 enterprises across various sectors, the majority of which are non-State-owned enterprises and small and medium-sized enterprises (SMEs).

Enterprises witnessed decreasing orders and sales as well as falling export prices, while their costs and tax burdens remained high in the first quarter, resulting in diminished profit margins, Li Lan, secretary-general of CESS, said over the weekend when the survey was published.

"SMEs are facing a more difficult situation this year, as a credit crunch has made it difficult to obtain loans from banks and channels for private lending have also become limited," Zhou Dewen, director of the Wenzhou Council for Promotion of Small and Medium-sized Enterprises, told the Global Times Sunday.

"Currently about 30 percent of SMEs in China are struggling to survive," he said.

Enterprise owners are cautiously optimistic about their business prospects in the second quarter, with 37.8 percent expecting their business to turn better, while 13.6 percent predicting deterioration, according to the survey.

Increasing costs and heavy tax burdens are still main challenges. More than half of the enterprise owners predict the labor costs to rise in the second quarter, and want the government to further reduce taxes for them, the survey said.

"Authorities should cut taxes and administrative charges for the SMEs," Zhou said. "Meanwhile, the central bank can further lower interest rates to support the SMEs."

Chen Naixing, a scholar from the Chinese Academy of Social Sciences, also suggested that a cut in taxes could have a broader impact.

"The government can consider abolishing all taxes for small and micro enterprises, if the move does not make a noticeable difference in the country's fiscal revenue," he told the Global Times Sunday.