The shifting of the labor force from some low-productivity sectors such as agriculture to some high-productivity sectors such as manufacturing spurred China's economic development in the last decade, with small- and medium-sized enterprises (SMEs) being one of its beneficiaries. But SMEs face new challenges this year, says an article in China Entrepreneur Magazine. Excerpts:

Low cost of labor has propelled the Chinese economy for three decades. It helped China maintain its fast economic growth even during the global financial crisis, and boosted the global economic recovery.

But such a growth, mainly export-led, has come at a cost. It is not conducive to boosting the domestic market because a great percentage of China-made products are being continuously exported.

Besides, excessive supply of money has aggravated the supply-demand imbalance by causing inflation. As a result, many SMEs are facing problems, including falling production.

To retain their competitiveness, SMEs should target the domestic market, because scarcity can inject vigor and vitality into the market. Every year, China produces innumerable amount of goods and exports a great part of it, and many of these made-in-China products remain inaccessible to people at home. Their scarcity drains domestic demand.

China's domestic market has a huge consumption potential which remains unattended. To fully meet this potential, enterprises have to seek innovation.By meeting the existing as well as potential domestic demand, SMEs can offset the disadvantage of rising cost of production and retain their competitiveness.

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