There were 218,000 enterprises by the end of last year, with revenues hitting 360 billion yuan (US$43.37 billion), an increase of 15.5 percent from a year earlier, according to the local municipal government.

"Among all kinds of small-sized firms, those engaged in the service sector tend to play an increasingly important role in the city's economic development," said Pu Zaiming, an official with the local government.

Shanghai has more than 70,000 small service firms, creating job opportunities for 700,000 people, Pu said.

"The consumption base in Shanghai is large enough for small firms to dig into," said Judy Tan, an analyst of E.J. McKay & Co Inc, a local business consulting firm.

Shanghai's economy grew by the fastest pace in five years in the first quarter of this year, the Shanghai Statistics Bureau reported.

The city's gross domestic product increased 11.8 percent to 132.6 billion yuan. The growth rate was 2.2 percent faster than that of the same period last year.

"If you have enough capital, right people and sensitive insight about some particular markets and industries, you can bring your own niche business to Shanghai," added Tan.

She also pointed out that businesses which have great potential in Shanghai are education, training and youth hostels.

"Because there is not intense competition in these sectors," said Tan.

But it is still difficult for the small businesses to get loans from commercial banks, and this obstacle may hamper the development of the sectors.

A loan staff member at the Agricultural Bank of China's Shanghai branch explained that because banks fear some of these firms may have credit worthiness problems, "commercial banks are reluctant to offer loans to small companies. The best way is to ask for help from lending guarantee firms."

China Development Bank signed a deal with the Shanghai municipal government yesterday to provide a 5 billion yuan credit line to local lending guarantee firms, which take on the risks of small- and medium-sized enterprises when these companies apply for bank loans.

(Shanghai Daily May 6, 2003)