This short notes reports some of the information presented at the 2015 China Small and Medium Enterprises (SME) Summit1 held on October 10 and 11 in Guangzhou.
Government Support for SMEs
China is committed to SME development and transformation. In particular, and based on the Summit presentations, China is looking to rapidly transform itself from a manufacturing economy focused on products to a consumer driven economy. The industrial strategy presented also emphasized embracing technological change at every stage of business operations.
Support for growing a vibrant SME ecosystem was transmitted by the speeches of Deputy Director General of the central government's Ministry of Industry and Information Technology, Guobin XIN (辛国斌)2, and Vice-Governor of Guangdong, Zhigeng LIU (刘志庚)3. In China, public speeches on policy made by central government officials and provincial politicians signals serious administrative and budgetary commitment to a project.
Vice-Governor LIU emphasized the importance of SME's to Guangdong's economy (the wealthiest province in China). For example, 80% of the new jobs in Guangdong will be created by SMEs, not by large multinational corporations or Chinese State Owned Enterprises.
Other points in Vice-Governor LIU's speech help to form a picture of the importance of SME transformation to Guangdong. The government projects that SMEs will develop 65% of the patents, develop 75% of the new technology and manufacture 80% of the products in Guangdong.
Government support for SMEs will be provided in four ways: 1) supporting innovation by lowering the barriers to entry, 2) technical upgrading of existing SMEs through increased support for online platforms, smart-manufacturing and demonstration workshops, 3) accelerating the development of finance platforms for SMEs along with the creation of innovative financial products, and 4) upgrading of government services to SMEs. Concrete examples of each were not provided.
That being stated, unlike the past where policy announcements did not always have corresponding budgetary support (for example, it has taken over a decade to achieve the school funding targets set in the 1990's), budgeting issues have improved in China. As important as economic transformation is to the Chinese economy, it is likely this support will materialize in some way.
Another strong signal of government support was the official program guide for the Summit. It includes an appendix with full text versions, not just citations, of key government policies relating to SMEs, Micro-enterprises，e-Commerce development and manufacturing transformation. These included State Council4, Ministerial5 and Guangdong provincial5 opinions. This is meant to further emphasize the government's commitment to Chinese SMEs. A particular focus of these opinions was e-Commerce.
One of the speakers was the Zipei TU (涂子沛), a vice-president of the Alibaba Group. As one might expect, his remarks centered on how the future of SMEs belonged to connectivity and the exploitation of data. And this seemed to be a theme taken up by most of the participants.
While most businesses in the United States that seek to stay relevant have an online presence, Mr. TU brought up the fact that only about 10% of Chinese companies had gone online in any meaningful way. In a country as large as China the potential for growth is obvious. But it should also be noted that while some speakers mentioned exports or overseas issues, the primary focus of each was developing pathways to serving Chinese consumers.
Other presenters provided insights about how Chinese companies are using their own platforms as well as others to provide value added services particular to China. Developing platforms that allow C2C and C2M were particularly popular. One idea that struck me as more and more important in China is transparency in product production.
An example of this is developing greater transparency around food production. As I've written elsewhere, China has food security issues as to quantity but also as to quality. Transparency in the process of food production isn't new but it will have a large audience in China. Developing online platforms to accommodate the dissemination of food production information is certainly possible. If the proposed revisions of the Food Safety Law are passed then this information will have to be maintained by every business in the production chain. Disseminating that information to consumers, however, would be a value-added way to increase customer loyalty.
China has developed a strategy to move from an export based economy to one more focused on Chinese consumers. To the extent the government can achieve this goal will depend on many factors. However, for those companies looking for opportunities to help Chinese SMEs develop their e-Commerce presence, many opportunities exist. Doing so effectively will require a greater understanding of the available government support and existing players.
1. The Summit （中国中小企业高峰论坛）was held as part of the12th China International SME Fair (第十二届中国国际中小企业博览会)。
4.国务院关于扶持小型微型企业健康发展的意见， 国发【2014】52号；国务院办公厅关于发展众创空间推进大众创新创业的指导意见， 国办发【2015】9号；国务院关于大力推进大众创业万众创新若干政策措施的意见，国发【2015】32号；国务院关于积极推进"互联网+"行动的指导意见， 国发【2015】40号；；。
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