A pilot financial reform aimed at helping small and medium-sized enterprises in Wenzhou, Zhejiang province, get funding has been widely welcomed since its launch in March, and organizations that have benefited from it report they have been enjoying considerably improved fortunes as a result.

The plan has been centered on 12 major areas in Wenzhou, one of the country's key manufacturing regions.

According to companies contacted by China Daily, the funds being made available have been used in many cases for them to simply survive, as the local economy slowed as a result of the downturn in business, especially from customers in countries severely affected by the eurozone's ongoing financial crisis.

Others talk of being able to use the funds now available, from, for instance Zhejiang Development and Reform Commission, among others, to help finance vital restructuring, brand development, improved technology, and other measures aimed at upgrading and improving industrial systems.

Locally, in many cases, the available lending has been used to pay off debt, and help with financial restructuring, and as vital ongoing working capital.

The provincial government has set a target of using $10 billion in foreign investment this year through overseas acquisitions or helping local companies get listed on overseas stock markets.

One local business leader in the city of Wenzhou reported that business sentiment in the area has never been lower than it is this year.

"A drop in international orders and about a 30 percent rise in labor and material costs have added enough pressure to SMEs, that the Wenzhou government reports some have simply left to look for better opportunities elsewhere," said Zheng Chen'ai, chairman of Wenzhou Chamber of Clothing Commerce.

Zheng added that many SMEs have had to face the additional challenge of tightened government policies, and for many survival is only for the fittest in the current environment.

Sun Shaoding is the owner of Zhejiang Fukang Group, a Wenzhou-based company supplying packing services and color-printing materials, and he too said that he is having to work harder than ever to recover from the toughening times.

He said his company had expected this year to enjoy something like a 20 per cent rise in profits for the first half, but figures have remained largely static compared to last year.

But the lending program has been a massive help to his city.

"After Wenzhou was selected for the pilot project, since the end of March we have had a really positive feeling that conditions will improve.

"We have been able to receive loans more easily as a result," said Sun.

The pilot was launched there in March after many local entrepreneurs were finding themselves unable to repay their debts, and some even fled the city due to the sudden tightening in their loan lending agreements from State-owned banks since last September.

The plan has seen privately owned financial services encouraged, village banks established, and rural financial agencies set up, all aimed at SMEs, as well as established State-owned banks being encouraged to ease restrictions and lend more to smaller businesses.

Wenzhou's resultant private lending registration service center was one of the first moves to be made in the financial pilot reform launched in the city, channeling private funds into the financial system.

Until July 9, the center had offered more than 600 million yuan ($95 million) of credit to local borrowers, the majority struggling SMEs.

Xu Zhiqian, a spokesman for Wenzhou's private lending center, said: "For the moment, about 90 percent of the borrowers are owners and shareholders of SMEs, which need the money for manufacturing-based operations."

Xu added that the center is working hard with banks to help SMEs in the city with the funds they need to solve their financial problems.

In Shanghai, too, huge efforts are being made to help SMEs.

As a means of speeding up the restructuring of the city, Shanghai authorities aim to pay particular attention to tertiary industry sectors, especially services including retail, logistics, trading and consumption.

The city's famous zeal for change is widely seen to have further energized the tens of thousands of SMEs there, which have always been the major driving force behind its service industry.

"Making contributions to boost the service industry and offering essential services to consumers and large companies in Shanghai have been the basis for the growth of SMEs," added Song Xiaohui, an officer with the Shanghai SME Development and Service Center.

In the process, these SMEs are changing the city's economic landscape, added Song.

Since 2009, Shanghai's government has been running a development strategy to speed up the service industries, including finance, trading, and information services, with the aim of helping SMEs.

"Most SMEs haven't put their production bases in Shanghai due to the high expenses of labor and land use - but many companies now want to have their offices here, especially those looking to develop better business opportunities and links with foreign clients," said Du Dian, deputy manager of Shanghai Dushi Industry Co Ltd.

Shi Jinchuan, director of the College of Economics at Zhejiang University, said that governments must continue to prioritize SMEs, as they remain so crucial to overall economic growth.

"Many policies being introduced are aimed at encouraging SMEs to find more ways to solve their own problems - that might be in brand rebuilding or cash flow, or upgrading their operational structures, for instance.

"SMEs must be helped and encouraged to continue to improve," said Shi.

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