By CESS, Human Resources Study and Training Center

Research Report No 207, 2011

From August 6 to September 6, 2011, 1,166 valid questionnaires responded to "A Questionnaire-based Follow-up Survey of China's Private Entrepreneurs, 2011" sponsored by CESS (China Entrepreneurs Survey System), Human Resources Study and Training Center of the Development Research Center of the State Council (DRC). The replies came from various industries in 31 provinces, autonomous regions and province-level municipalities, with the number of private industries in east China, central China, west China and northeast China accounting for 65%, 18.1%, 12% and 4.9% respectively and the number of large, small and medium-sized enterprises for 4.4%, 40.4% and 55.2% respectively. The number of managing directors, general managers, factory directors and Party committee secretaries made up 96.8%.

I. Difficulties and Challenges Hampering the Growth of China's Private Enterprises

1. Cost rise has been a major stumbling block to the growth of private enterprises

In recent years, cost rise has always been holding back the growth of private enterprises. Since 2011, in particular, such factors as the slowdown of the world economic resurgence, the fluctuation of the prices of major energy resources and raw materials at a higher level and the drastic rise of labor cost have turned the cost rise into a stumbling block to the growth of private enterprises. Survey findings show that "rise of labor cost" (79.7%) and "rise of energy and raw material cost" (60.1%) were two choices given by the majority of private entrepreneurs as the "major stumbling blocks to the growth of private businesses", with the percentages being much higher than those of other choices, up 6.7 and 4 percentage points over the survey findings made in 2010 and 18.5 and 7.5 percentage points higher over the survey findings accomplished in 2009. (Table 1).

Table 1　　Major Difficulties Hampering the Growth of Enterprises (%)

In terms of labor cost, survey findings reveal that 98.6% of private entrepreneurs think that labor cost has risen at present, with the ratio being 98.4 percentage points more than the proportion of those who consider the cost has reduced. The figure has been 2.8 percentage points higher than the survey results scored in 2010.

In terms of material purchase prices, survey findings show that 87.7% of private entrepreneurs regard present material purchase prices as rising, with the ratio being 84.7 percentage points higher than the number of those who regard the prices as dropping. The figure has been 11.9 percentage points higher than the survey results scored in 2010.

2. Glaring financial straits facing small and medium-sized private enterprises

Since 2011, the retrenchment of the monetary policy has aggravated the financial strains among private enterprises. Survey findings indicate that currently 48.3% of private enterprises are short of circulating funds, with 45.5% of them having adequate funds and 6.2% having more than enough. The proportion of private enterprises being short of money is 42.1 percentage points higher than the number of those with adequate funds. Such a figure has been 10.2 percentage points higher than what was gained in 2010. Of those enterprises, private enterprises in northeast and central China, small and medium-sized private enterprises, those in the real estate industry, accommodation and catering industries and in the manufacturing industries as iron and steel and paper making are particularly short of funds.

Along with a fund shortage, private enterprises, especially small and medium-sized ones, are also facing worsening financial straits. In terms of private enterprises' access to bank loans, survey findings suggest that 49.9% of private entrepreneurs think it fairly difficult or much difficult to have access to the loans, while 29.2% of them regard it as difficult and 20.9% of them consider it to be less difficult or easy. The overall appraisal value is 2.51, being much lower than the median 3 and than the survey results scored in 2010. And the appraisal value of small and medium-sized enterprises is much lower than that of large private enterprises.

The case of "paying extra costs, apart from regulated interest rates, related to bank loans" has been designed in the survey in order to learn more about the bank loans offered to private enterprises. Survey findings show that 35% of private entrepreneurs said they had paid a lot or much, 20.1% of them said they had paid normal sums, 33% of them said they had paid some, only 11.9% of them said they had not paid any extra costs. The overall appraisal value is 3.14, being lower than the survey results scored in 2010.

Finding it much difficult to have access to bank loans, quite a number of private enterprises choose to raise nongovernmental funds. Therefore, "the issue of whether it is easy or difficult for private enterprises to raise nongovernmental funds" has also been surveyed. Relevant findings show that 30% of private entrepreneurs think it quite difficult or comparatively difficult to raise nongovernmental funds, 34.5% of them regard it as difficult and 35.5% of them consider it not too difficult or not difficult. The overall appraisal value is 3.05, being slightly higher than the survey results scored in 2010.

3. Private entrepreneurs all think that the tax burden on them is heavy

Survey findings indicate that 83.9% of private entrepreneurs think the tax burden is very heavy or comparatively heavy, 15.6% of them regard the burden as usual and only 0.5% of them consider the burden to be light. The overall appraisal value is only 1.83, being much lower than the median 3 and also lower than the survey results scored in 2010.

The case of "the proportion of charges, fund-raising and levies in the enterprise's sales revenue paid by the enterprise in a year to governments at all levels apart from State-regulated costs" has also been designed for the survey in order to learn more about the tax burdens on private enterprises. Survey findings show that 8.8% of the private enterprises chose "0%", 27.6% of them chose "0~0.1%", 40% of them chose "0.1%~1%", 19.6% of them chose "1%~5%" and 4% of them chose "more than 5%". And the proportion of the private enterprises which chose "1%~5%" or "more than 5%" is much higher than the survey results scored in 2010.

4. Employment straits facing private enterprises

Survey findings show that the issue of employment straits facing private enterprises has now loomed up. Relevant findings reveal that, about the prediction of employment straits in the next year, 28.5% of private entrepreneurs think it fairly difficult to recruit workers, 50.9% of them regard it as a little bit difficult, 14.2% of them do not think it difficult and 6.4% of them say it is a toss-up. By region, a higher percentage of 31.4% of private enterprises in west China think it fairly difficult to recruit workers, while a percentage of 20.5% of private enterprises in central China where rural laborers are redundant consider labor recruitment to be less difficult. By number, the number of small and medium-sized private enterprises considering recruitment fairly difficult is evidently higher than that of large private enterprises.

Survey findings show that the main reasons for employment straits are "escalating expectations of job choosing among migrant workers of younger generation" and "excessively fast rise in commodity prices heightening the cost of living of job seekers and lowering prospective earnings", which are top two choices given by private entrepreneurs, accounting for 73.1% and 62.5% respectively, being evidently higher than other choices. Other high-proportioned choices include "shortage of total labor supply" (38.2%), "low wage and lack of competitiveness" (30.2%), "demanding job skills" (26.9%), "insufficient employment channels" (24.7%), "loss of employees" (24.6%) and "unattractive brands and business scale" (21%).

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