WENZHOU -- Evening lights shining from surrounding factories shatter the dark silence dominating buildings owned by the Zhengdeli Shoes Company. Piles of unfinished shoes sit the company's warehouse and workshops. A few security guards stand by a gate where workers sporadically come and go.

This was the scene after news broke that the company's boss, Shen Kuizheng, committed suicide to escape debts. The company is located in Wenzhou, China's entrepreneurial capital.

Shen is just one of at least 80 businessmen in the eastern coastal city who have disappeared, committed suicide or declared bankruptcy to invalidate debts owed to individual creditors pooled from the informal lending market and employees.

News of the incidents has even made waves in the central government. During a visit to Wenzhou on Oct 5, Premier Wen Jiabao urged financial support for cash-strapped small businesses. However, a multi-department investigation has shown that the crisis has largely been kept under control.

Investigators deny massive collapse

Previous media reports stated that small- and medium-sized enterprises (SMEs), which contribute to 60 percent of China's industrial output and create 80 percent of the country's jobs, have faced an unprecedented crisis this year as they struggle to survive a liquidity crunch amid the country's tightened macroeconomic control policies.

However, the People's Bank of China, or the country's central bank, the Ministry of Industry and Information Technology (MIIT) and the National Bureau of Statistics (NBS) came to a different conclusion based on recent investigations conducted in southeast China's Guangdong Province and the eastern provinces of Zhejiang and Jiangsu, the country's most developed regions.

"A massive collapse of small businesses does not exist, even though some SMEs have been confronted with cash shortages. The number of SMEs keeps increasing, as broken-down enterprises are fewer in number than newly founded ones," said Wang Wenbo, an NBS official, at a conference held by the Chinese Academy of Social Sciences on Monday.

A final report from the investigations has not yet been issued.

Investigators found that shifting over to real estate speculation dragged many SMEs into cash shortages, forcing them to halt operation. They concluded that the country's macroeconomic control policies, aimed at cooling inflation and reign in the runaway property market, did not lead to the funding shortages.

"Many business owners actually prefer tightening measures, because loose monetary policies can boost the prices of raw materials. Policy changes are not the key to their cash shortages," Wang said.

SMEs that have focused on their primary businesses face little financial difficulty, the investigation showed.

Government's efforts to weather crisis

"Small enterprises should be a priority for bank credit support and enjoy more preferential tax policies," Premier Wen said during his visit to Wenzhou. "Banks should increase their tolerance for the non-performing loan (NPL) ratios of small enterprises and reduce the cost of securing credit."

Wen also requested a crackdown on the high-interest informal lending market, which operates outside the country's banking industry. The informal lending market between companies and individuals provides high-interest loans to many private entrepreneurs facing a cash squeeze.

In response to Wen's appeal, the Zhejiang provincial government has sent 11 work groups to oversee a bank bailout of private firms suffering from the liquidity crunch. A total of 25 banks in Wenzhou pledged on Tuesday to increase lending in order to help private firms weather the debt crisis.

"The government will help those companies that are trapped in the financial crunch but have the ability to survive the difficulties," said Chen Derong, vice governor of Zhejiang province.