SMEs respond to pressures with ingenuity, new products(2)

"We are kind of falling into a dilemma. On one hand, we have to automate, but on the other, expensive machines cannot fully replace a human workforce, thus the surging cost," he said.

Ye added that SMEs are facing heavy tax burdens. "We seek little financial help now as bank loans are very limited for SMEs. But we do hope that taxes will be reduced somehow."

The central government began trying out a shift from the business tax to a value-added tax at the beginning of 2012. Some of the modern service companies in Shanghai, which were the first to enjoy the new policy, saw their tax bills fall by up to 40 percent.

Li Jianjiang registered a light company in Japan in 1993 and opened Zhejiang Teling Light Industry Co Ltd in Wenzhou as a production base in 1997. To expand the market, Li's company is now also making electric products such as shavers, hair cutters and massagers.

A sales department for small electric appliances was launched earlier this year, which aims to have more than 100 sales points in stores in China.

When the manufacturing industry in Wenzhou slowed down as a result of the global recession, Li started his own small-loan company as a side business.

The company offered loans of more than 1 billion yuan to hundreds of companies in 2012.

"I am discussing with my business partners about launching a private-invested bank to break the monopoly of State-owned banks, to lend to private companies with manageable risks," said Li.

Jin Feipeng, general manager of Shanghai Jiu Ding Clock, dared to transform his family business as an original equipment manufacturer of overseas clocks and clock replacements into one that is a designer and manufacturer of electric protective covers for automobiles.

"After working in the family company for more than two years, I realized that being an OEM shouldn't be the future of the company," said Jin, taking into consideration the declining domestic and foreign need for his company's luxury timepieces in the past three years.

Investing nearly 20 million yuan in his new business, Jin said they have already received more than 30,000 orders, mainly from domestic buyers.

The electric car cover, which can be charged via solar energy in five hours and with electric plug-ins in a shorter time, will go on sale in late July and is expected to bring in 10 million yuan in the first three months.

Jin added that he had the design team and technicians of the clock company complete part of the work for the new product as well as buy in parts from other smaller manufacturers to minimize the labor costs.

"I believe the market for electric protective covers for cars will be much larger with long-term expansion than the clock industry, which will be maintained as a smaller traditional sector," said Jin.

Noticing the shrinking export orders and tougher trade requirements from overseas, Zhang Guanjin, general manager of Shaoxing Jinyong Textile Co Ltd in Zhejiang, who has been in the textile industry for more than 25 years, turned back to the domestic market at a time when the central government is calling for boosting domestic demand.

Jinyong used to be a highly export-oriented company, with more than 90 percent of its products sold overseas. But it started to look inward in 2008. Zhang saw "it was high time for a restructuring, otherwise the company would go bankrupt very soon".

Starting this year, Zhang's company is selling 60 percent of its products in China and the rest overseas. Even though export orders decreased by 20 percent, the company is still doing quite well. "The domestic market is unexpectedly vibrant, and the market is huge," he said.

What is also a great surprise to Zhang is that Chinese customers have higher requirements for creativity and innovation. His company is now not only manufacturing but also designing.

"As an export-oriented company, we used to care about the amount only. But now, we are designers, and it is the major task we have to complete," said Zhang proudly.