Companies grow with anxieties amid gov't hope of stable growth

Updated: 2012-02-22 17:52


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BEIJING - At a Sunvim textile factory in east China's Shandong province, stylish bedsheets, towels and curtains steadily spew from production machinery as workers bustle amid noisy looms. Outside, trucks stand ready to pick up orders.

But this busy scene isn't comforting to Sun Rigui, head of conglomerate Sunvim, which is one of China's biggest home textile manufacturers and exporters. Although his company has abundant orders and a suitably lean workforce, Sun is anxious because he doesn't have a clear sense of the big picture in which Sunvim is operating.

"We've been feeling pressure from all directions since last August. In some ways, it's no better than 2008 when the financial crisis broke out," he said.

Growing Anxieties

Sun is not alone in his worries.

Waning external demand due to the sluggish US and European economies, a steep rise in production costs and difficulty securing financing have combined to create problems for many Chinese companies, not just Sunvim.

"Unexpected price rises make it difficult to manage our business and have narrowed our profit margins," said Chen Yulan, chairman of Qingdao's Jifa Group, a major exporter of textiles and clothing.

Of particular concern to Chen is fluctuation in macro-policies.

The Chinese government is working hard to ensure policy stability. At a central economic work conference last year, the government set "making progress while maintaining stability" as the main theme of economic and social development in 2012.

"Stability means to maintain basically steady macro-economic policy, relatively fast economic growth, stable consumer prices and social stability," said a statement released after the conference.

The issue of stability will also be a focus at the Fifth Session of the 11th National People's Congress (NPC), China's top legislature, and the Fifth Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), China's top political advisory body. The two sessions will convene in early March.

Meanwhile, local authorities have also moved to keep trade policies stable.

In export-oriented Jiangsu province, the commerce department vowed to emphasize foreign trade growth. The province showed a decline in exports to the European Union during the September-December period last year.

"We are not sure about the economic situation this year, but one thing we are sure of is that our foreign trade policies will remain stable and our export tax rebate policies will stay unchanged," said Da Jiaxiang, deputy director of the province's commerce department.

The province still aims for 8-percent growth in foreign trade this year.

While policymakers are struggling to create a better environment, many companies are trying to change their business model.

For example, Sunvim's Sun said within five years he wants to lower the company's reliance on exports. He said he wants exports to drop from 90 percent of sales to 60 percent.

Innovation offers hope

China's central economic work conference also encouraged companies to be more innovative.

The Jifa Group is putting this suggestion into practice.

Although Jifa is a major supplier to Uniqlo, a Japanese casual wear retailer that is expanding aggressively in China, Chen wants her company to have its own brand and proprietory technology.

"For our company, what is important is progress. If you're not progressing, you're falling behind," said Chen.

Jifa's own brand uses fibers made from the shells of marine animals. The fibers make microbe-resistant textiles for products like underwear, antiseptic bandages and tents.

The new technology, which the company developed itself, has increased the added value of these products five- to six-fold.

"When the advantages of labor cost gradually disappear, our own brands will be the new direction," said Huang Lihua, the mastermind of the fiber technology.

While traditional manufacturing industries are using innovation to improve their competitiveness, emerging industries in China are getting strong support from national policy.

As part of its 12th Five-Year Plan (2011-2015), China has pledged to foster certain strategically important emerging industries in order to gain a global edge in these fields.

Wuxi New District, a research base for the Internet of Things and solar photovoltaic (PV) technology, is aiming for 230 billion yuan (36.53 billion U.S. dollars) of output this year in emerging industries. It also hopes to maintain a 15 percent annual growth rate in high-tech and emerging industries.

However, exploding growth has also brought new problems.

"Over-capacity will accompany the fostering of emerging industries, but our direction is right," said Xu Gang, a senior official with the district.

One reason behind the over-capacity lies with the pricing of renewal energy in China.

"To solve the problem, the key is to break down the entrenched interests of monopoly industries," said Sunvim's Sun, who has invested billions in PV generators.

Recognizing the problem, Chinese Premier Wen Jiabao said earlier that reform of monopoly industries is "an important task."

He said the investment of private capital in such sectors would not only help ease overall economic difficulty, but accelerate the development of these sectors. He also said that during the first half of the year the government will draw up detailed rules encouraging private investment in those industries.