For businessmen in east coastal Zhejiang Province, one question holds precedence over all other concerns: Will policymakers soon phase out the heavy economic stimulus? After recovering lost ground on the back of the bailout packages, they are calling for more follow-up incentives to sustain their gains.

"We are beneficiaries of the government's 4-trillion-yuan ($586 billion) stimulus package," said Liang Erzhen, General Manager of Zhejiang Starsino Techs Co. Ltd. "Were it not for the 3G orders from China Mobile and China Telecom, our revenues would have been 50 percent lower than last year."

The experience of Starsino could provide a vivid insight into how the local economy hinged its fortune on the stimulative policies. In the first nine months of this year, the output value of IT solutions providers amounted to around 70 million yuan ($10.2 million), representing a robust increase of more than 10 percent year on year.

In addition, the once-reeling export front has also experienced an up tick from the government support. The Jiandong Freight Station in Yiwu of Zhejiang, for instance, reported 273,800 tons of throughput in September, compared with 147,200 tons in July. Yiwu is the largest petty commodities market in the world.

At the center of China's private economy, industries in Zhejiang are recouping growth rates and foreign trade is beginning to set foot in positive territory once again. The province's imports in September grew 7.6 percent year on year to reach $5.59 billion, reversing an eight-month downward trend. Its exports in September were down 11.2 percent—the mildest drop this year.

But in the eyes of some entrepreneurs and economists in Zhejiang, establishing a solid foundation for the recovery will still take some time. An abrupt withdrawal of stimulus funds may put businesses at risk of taking a nosedive, most businessmen agree.

"There is indeed a flow of orders for Christmas," said Huang Zhiping, Secretary of Yiwu Municipal Party Committee. "But most importantly, it is the heavy government measures that have warmed up the business climate."

"The economy of Zhejiang is healing its wounds, but a return to prosperity is still some way off," said Ma Shiyong, Chairman of the Board of the Bank of Hangzhou. "Many of our SME (small and medium-sized enterprise) clients are picking up export orders, but mostly short-term small ones."

Ma added that the international settlement of the bank was $1.67 billion from July to September, $450 million less than the same period last year. This is a clear indicator that dismal economic times are not completely over. In addition, it is imperative now to strengthen their work efficiency and streamline application procedures for startup businesses, Ma said.

Wang Yongfu, Director of the Hangzhou Entrepreneurs' Association, said worries still loom large over the prospect of future economic growth. The problem of excess industrial capacity, for example, still needs to be seriously addressed, he added.

The biggest concern, Starsino's General Manager Liang said, hangs over the future of private enterprises. Since the financial crisis broke out, private companies were especially hard hit, as it was more difficult for them to obtain financing either from commercial banks or government funds, he said.

SAILING ON: Zhejiang Jinhaiwan Shipyard Co. Ltd. gets ready to deliver its newly built ship to a shipping company of Norway (FU HONGYAN)

Lan Jianping, Director of Zhejiang Research Institute of Industrial Economy, said a number of entrepreneurs are now deeply worried. When the government started to implement loose monetary policies, private enterprises were the last ones to benefit from increased loans. But if the policies are tightened, they would be the first to suffer, he said.

This is likely to affect the business confidence that is just beginning to reestablish itself, added Lan.

Zhejiang is gearing up for a shift to rely more on consumption and push its manufacturing industry up the value chain, Huang said. This will require a stable policy environment and sustained government support, he said.

It will also be necessary for the policymakers to maintain a stable and flexible currency policy, Lan said. Modest depreciation of the renminbi should be allowed to ease trade tensions and inject steam into the ailing export sector. Meanwhile, to maintain market competition, state enterprises should not be encouraged to take over their private rivals, added Lan.

Zhou Xiaoguang, Chairman of the Board of Zhejiang Xinguang Holdings Group, said the Chinese economy has yet to shake off the fallout from the global recession. Zhou's group is a giant ornament maker based in Jinhua of Zhejiang. More vigorous efforts are still needed to support research and development and spur business innovations, while the government should establish a number of powerful measures to tackle rising trade frictions, Zhou said.

Source: Beijing Review

Editor: Lency