SMEs must adapt to tougher times

The flash HSBC/Markit manufacturing purchasing managers' index (PMI) climbed to a three-month high of 50.4 for October, up from a final reading of 50.2 in September but just barely above the 50-point mark separating expansion from contraction.

With this latest indication of weakness in the manufacturing sector, the problems facing China's small- and medium-sized enterprises (SMEs) are hardly easing. Against a backdrop of stalling economic growth in the domestic market, SMEs are competing fiercely with each other as they confront rising production costs, difficult financing conditions and heavy tax burdens. Meanwhile, in the export market, it is becoming harder for local manufacturers to win orders with low prices alone.

China's SMEs need to do more to improve efficiency and competitiveness. To adapt to the challenges, they need to move up the value chain, focus on technological innovation and quicken their upgrading plans. Also, as rules governing environmental protection and resources become more stringent, traditional industries like steel and cement are expected to face added restraints in the coming future.