GUANGZHOU - The official overseeing Guangdong's small and medium-sized enterprises (SME) denied on Thursday that sweeping SME bankruptcies are taking place in the province, although the businesses are confronted by a number of problems.

"SMEs in Guangdong are facing increasing difficulties in their production and operation, with rising overall costs and a widening gap in their working capital," said Zhang Wenxian, director of the Guangdong SME bureau.

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SMEs are facing new difficulties, including a shortage of capital and rising costs for fund-raising," Zhang said.

The situation meant that some SMEs dared not accept orders and some industries are seeing a decline in profits or the suspension of business, Zhang said.

However, the general situation for SMEs in Guangdong remains stable, without significant bankruptcies.

Media reports have been painting a gloomy picture for SMEs in both Guangdong and Zhejiang provinces, claiming that the situation is even worse than in 2008 when the global economic downturn hit, and has been using the phrase "sweeping bankruptcies," although no official statistics are available.

Difficulties have arisen from the continued appreciation of the yuan, the rising costs of labor and raw materials, a shortage of capital amid credit-tightening measures, and power shortages in some areas, according to the reports.

Earlier this month, China News Service reported that Li Jinhui, chairman of Dongguan Lianying Non-woven Technology Co in Guangdong, predicted that bankruptcies could become prevalent in the city of Dongguan in the second half of the year, with only innovative players remaining fully operational.

Zhang said the number of non-State-owned businesses in Guangdong grew by 3.5 percent in the first quarter of the year, while privately held domestic firms rose by 14.7 percent year-on-year.

SMEs in the province posted double-digit growth in industrial added-value in the first five months, which was more than 11 percentage points higher than the provincial average.

They also reported growth in imports, exports and tax contributions.

Lending to SMEs rose steadily across the country during the period, with the lending structure further optimized, Zhang said, citing the People's Bank of China, the central bank.

Zhang's bureau, however, will pay close attention to the situation of SMEs and take preventative measures, he said.

In May, the banking watchdog, the China Banking Regulatory Commission, issued a notice to commercial banks urging them to increase lending to SMEs.