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Emphasise real economy, say Chinese entrepreneurs

Publication Date : 08-04-2014

 

Chinese entrepreneurs have called for the placing of more importance on the contracting real economy to boost growth amid concerns about the country's economic slowdown.

"A healthy market economy relies on both a real and virtual economy, but the real one is the fundamental basis, serviced and pushed forward by the highly efficient virtual one," said Gao Dekang, founder and chief executive officer of Bosideng Group, China's largest down clothing maker.

But the real economy, primarily the manufacturing industry, has been under "unprecedented" attack in recent years because of factors including soaring costs and an appreciating currency, said Gao.

Gao's warning came after a string of economic indicators suggest China's first-quarter growth may have slipped below the annual target of 7.5 per cent.

The latest evidence can be found in the manufacturing Purchasing Managers' Index, a key measure of factory activity in China.

The official PMI for March, compiled by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, edged up 0.1 of a percentage point from February to 50.3. The reading, the first rise since November, is a touch above 50 - the expansion/contraction watershed.

The HSBC/Markit PMI, which sampled small and medium-sized enterprises, dipped to an eight-month low of 48 in March, from a final reading of 48.5 in February. It also signals the sharpest fall in output since November 2011.

That, combined with other weak indicators ranging from industrial production, fixed asset investment to power consumption, all painted a murky picture of the economy.

According to Gao, SMEs currently have slim profit margins, while the large listed ones suffer from overcapacity and a lack of innovation. Burdened by the sharp appreciation of the yuan, a glut of enterprises that heavily relied on exports have gone bankrupt.

"A number of enterprises have shifted their investment focus to real estate, bank financing and trust funds. The reason is very simple: They can barely profit from developing real enterprises," he said.

Gao urged the government to take stronger measures to lead the real economy, including opening market access, expanding room for investment and relieving the burdens on enterprises.

He also called for improving the level of financial supervision, encouraging investment and fighting against speculation to enable the finance sector to better serve the real economy.

Gao's appeal will not fall on deaf ears. When delivering a government report on March 5, Premier Li Keqiang pledged: "We will ensure that financial services play an active role in meeting the needs of the real economy, including small and micro businesses, agriculture, rural areas and farmers."

The market should have more confidence in the real economy, said Cui Guiliang, chairman of VV Group, the largest soybean milk enterprise in China and one of the 10 largest foodstuff production enterprises in the country.

"It is natural that money would be attracted by sectors with high rates of return, but no matter which sectors the money is invested into and no matter how much money is made in virtual economies, people have to consume products such as food," he said.

Cui also called for the government's stable support for the real economy given that it is not an "easy" task. "Money is not the only key for success. Real enterprises also need a stable market share, brand recognition and technologies run by professional entrepreneurs," he said.

Gao, from Bosideng, said, in addition to support, the real enterprises themselves should enhance their competitive edge through innovation and better management.

Amid China's declining share of US and European imports, Bosideng tried to lead Chinese enterprises in globalisation through means such as opening up a flagship store in London, buying a UK-based menswear label and opening a pop-up store in New York.

 

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