Profit Margins of China Businesses Hurt with Growing Labour Costs and Taxes

Profit Margins of China Businesses Hurt with Growing Labour Costs and TaxesThe businessmen of China are facing major hurdles in the road to profitability. Zhu Zhangjin, an owner of a furniture factory in China, the interest rates on borrowings is one of the major road blocks to profitability along with the growing taxes and rates of labours. Zhu says, "It really hurts manufacturing businesses where profit margins are already thin."

The company run by Zhu employs around five thousand people and makes sofas as well as car seats for export to the Europe and the U. S. It is one of the labour-intensive businesses in China businesses that have strengthened the growth of the nation for about three odd years.

The central bank of the country has trimmed the interest rates two times in last six months in order to counterbalance the slowdown, growing bad debts and to clear out the shadow lending which is now making the banks unwilling to give loans to smaller businesses.

Zhao Yang, the chief economist at Nomura Holdings Inc. based in Hong Kong said, "It's a structural problem that can't be quickly addressed." According to him the financial system in China which is not very friendly to private companies and the central bank did not have many options left but to trim the standard short-term interest rates further.