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Guangdong: newly-registered firms outnumber bankrupt ones

By Nie Peng (chinadaily.com.cn)
Updated: 2008-11-11 16:56

Although more than 50,000 enterprises in Guangdong province shut down in the first three quarters, the number of newly-registered companies exceeds 90,000, said Xiao Zhiheng, vice governor of the southern province on Monday.

"Media reports said recently that Guangdong, especially the Pearl River Delta, had witnessed 'a surge of bankruptcies', leaving a large number of migrant workers to head back to their homes. The reports have drawn close attention from the central and the provincial governments," Xiao said at a provincial statistical work conference. "But our investigations showed that although some enterprises did close down, it is inappropriate to describe the situation as 'a surge of bankruptcies'."

He said the latest data from Guangdong's bureau of statistics showed the total number of bankrupt enterprises surpassed 50,000 in the first nine months, indicating a grim situation. During the same time, however, more than 90,000 new enterprises were registered in the province.

Xiao expects the current financial tsunami to have a wider and greater impact on the economy than the Southeast Asian financial crisis in 1997. He said further investigations are needed to analyze its impact on Guangdong as well as new trends in enterprises' operations, foreign trade and the labor market.

Liu Huanquan, head of Guangdong's small and medium enterprises (SMEs) administration, said on Friday that the increasing number of SME bankruptcies had resulted from industry structure adjustment as well as SMEs' own management problems.

Liu said the global slowdown, rising oil and grain prices and the financial meltdown triggered by the US subprime mortgage crisis, together with the snow havoc and summer floods this year added to the difficulties for Guangdong's SMEs.

According to Liu, many SMEs had to halt production from time to time owing to a lack of liquidity, and bad management and a broken capital chain dragged some of them deeper in the mire as they struggled for survival.

He said the province's SMEs mainly concentrated on the traditional tertiary industry and manufacturing industry. They need a fundamental change from the current development mode, which features high investment, high consumption, high pollution and low efficiency, he noted.

Liu said Guangdong's enterprises manufactured products for many famous international brands, but seldom had their own brands.

In mid-October, Hong Kong-listed Smart Union Group (Holdings) Ltd, a leading manufacturer for three of the top five US toy brands, closed down its two factories in Dongguan of Guangdong, leaving thousands of workers jobless and owing them months of salary. The local government spent 24 million yuan covering the defaulted wages.

Analysts have blamed the closure of its mainland factories on declining overseas orders and the company's poor management. Its interim business report showed the company recorded over HK$300 million in loss.