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News Analysis Different PMI readings highlight China SMEs plight

BEIJING, April 3 (Xinhua) -- Experts said on Tuesday that the plight of China's small and medium-sized enterprises (SMEs) are clearly shown in the contradictory readings of the country's manufacturing sectors.The Purchasing Managers Index (PMI), a preliminary readout of China's manufacturing activity, jumped to 53.1 percent in March, 2.1 percentage points higher than a month earlier, according to the China Federation of Logistics and Purchasing (CFLP).The March figure has risen for four consecutive months to the highest level since last March. A reading of 50 percent demarcates ipad accessories car kit expansion from contraction.The figure beat the expectations of most analysts, as the market had projected that March's reading would fall below 51 percent.However, figures released hours discount ps3 accessories later by HSBC told a completely different story.The bank placed the country's March PMI at 48.2, representing a decline for five consecutive months.HSBC economist Qu Hongbin attributed the difference between the CFLP and HSBC readings to different choices of survey samples and methods of seasonal adjustment.Calculation of the CFLP index covered more than 800 enterprises, including more state-owned and large enterprises, while HSBC's poll only includes around 400 small- and medium-sized companies."The split reflects the HSBC survey's greater focus on smaller, export-oriented manufacturers, many of whom are feeling the effects of weak global demand and tough credit markets," Alaistair Chan, an economist with Moody's Analytics, told Xinhua in an exclusive interview.The official index is dominated by larger state-owned enterprises that are benefiting from a recent relaxation in lending quotas, Chan said.In a bid to ease a credit crunch and wholesale cellphone secure growth in the wake of weak external demands, China's central bank announced mid-February that it would lower banks' reserve requirement ratio (RRR) by 50 basic points.The cut, the second of its kind in three months, brought the RRR to 20.5 percent for large commercial banks and 17 percent for mid- and small-sized banks, the central bank said.Rajiv Biswas, Asia-Pacific Chief Economist for IHS Global Insight, said that China's large enterprises have a better chance of getting finance during the significant tightening of monetary policy in 2011."Better and cheaper access to bank finance has allowed large enterprises to continue to pursue their expansion plans and new business, while SMEs are being squeezed by the credit squeeze and high costs of finance," according to Biswas.Biswas sees that further easing in the RRR is needed in 2012, as well as some easing in interest rates.This view was echoed by Chan, who said that China's smaller enterprises have been struggling with weak export demand and difficult financing.However, Chan said a proposal announced by China a week earlier to allow greater private lending in the eastern city of Wenzhou, represents a step in rectifying this situation.Last Wednesday, China's State Council approved plans to set up a pilot zone in Wenzhou to regulate private financing activities.The long-awaited decision comes as underground private financing activities in Wenzhou, a major source of funding for the nation's small- and medium-sized businesses, have stirred up financial disputes and crime, and have threatened financial and economic stability.The city's private business owners had turned to underground lenders after normal loans become difficult to obtain due to the government's tight monetary policy to combat high inflation.Chan said that the government's move would "attract more capital into that sector and boost credit to smaller firms."

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