SHANGHAI : There's a growing number of small- and medium-sized companies in China calling on the government for help to deal with the rising yuan.

With exports slowing down, they argue that a strengthening currency is eating into their margins.

However, some analysts said these exporters should be looking at moving up the value chain to keep their competitive edge.

According to official figures, there are about 300,000 small- and medium-sized enterprises (SMEs) in the country, providing employment to more than 56 million people.

With exports on a downtrend, the SMEs said a rising yuan, thinning profit margins and rising costs of raw materials are hurting them.

The Chinese currency has risen some 7 per cent against the US dollar so far this year, and some economists are now arguing that the exchange rate policy should be adjusted in order to slow the rise in the yuan. However, others said external factors are a key factor to consider.

"It's a marginal effect in my view and we think the slowdown in exports is mostly caused by the slowdown of overseas demand, not by the appreciation of the yuan," said Wei Li, an economist at Standard Chartered Bank (China).

Economists also urged smaller exporters to move up the value chain. They said SMEs in China need to innovate to survive and this is where the government can help.

Wei said: "For the government, it needs to support the firms who are involved in high technology products. The government should allocate more direct sources, especially loans for them, and give better investment rationing for such innovation. But at the end of the day, some will have to go out of the market... that's how the market works."

Despite slowing exports, the world's 4th largest economy is still expected to turn in a double-digit growth rate for the year. But inflation is seen as the biggest concern. It hit a high of 8.7% in February before easing off a little; it stood at 7.1% last month. - CNA /ls