2011 was a difficult year for China's small and medium-sized companies, thanks to tightened monetary conditions and dwindling overseas demand.

Some businesses have even been forced to shut down. But with a labour shortage across many of the country's manufacturing hubs, what does this mean for worker wages?

Changlong Garment is one of thousands of clothing factories located in Ningbo, Zhejiang Province. Its primary source of business is filling orders for foreign brands. But the factory has been hard-hit by the global economic downturn and increasing prices of raw materials. Profits have dropped nearly 10 percent, though output is around the same as last year. In this low profit-margin industry, the slightest decline means almost no net income. But in contrast, workers’ salaries have increased by 10 percent or even more.

Migrant worker from Changlong Garment said: "I have been there for three years. My income is getting better each year . I earned two thousand yuan this month. The year-end bonus is also substantial!"

Kaixin Technology, a company that produces network cables, is also facing the same dilemma of slumping orders and declining profits.

Liu Yong, manager of Kaixin Technology said: "Orders have declined thirty or forty percent in the third quarter of 2011."

Despite the sharp slump in profits, many workers say their welfare and benefits remain the same.

Peng Yunkuan, worker from Kainxin Technology said: "I know the profit outlook is dim, but our welfare is good as usual."

A chronic shortage of labor has plagued many factory towns across China. Many migrant workers are opting to return to the land, or relocate closer to home. The country’s small and medium-sized businesses are facing tough times, but are hanging onto their workers as precious resources.

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