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Economic Growth Cooling Down
Cover Stories Series 2012> Economic Growth Cooling Down
UPDATED: January 30, 2012 NO. 5 FEBRUARY 2, 2012
Worse Than 2008
Chinese SMEs should prepare for an even bumpier ride ahead
By Lan Xinzhen

Zhu said the MIIT will support innovative, labor-intensive and creative SMEs, especially small and micro-sized enterprises, further improve and carry out the supporting policies, strengthen guidance for SMEs, and improve services and the development environment for SMEs. The MIIT will continue to implement the existing favorable fiscal, tax and financial policies for SMEs and introduce other policies to support the healthy development of SMEs. MIIT is now considering cutting SMEs' tax burdens, pushing financial institutions to give more credit support to SMEs, and set up credit re-guarantee institutions for SMEs in areas where conditions permit. Zhu said the government will further expand the financing channels for SMEs, and encourage and support the construction of financing service platforms. In the meantime, the SMEs are encouraged to transform their development patterns, and the government will focus on supporting the technology upgrading of SMEs.

According to Zhu, MIIT has set a preliminary target for the development of SMEs. During the 12th Five-Year Plan (2011-15) period, the number of registered SMEs should increase 8 percent year on year on average; the number of SMEs with relatively bigger operational revenue should increase by 6 percent year on year on average; and the value added of SMEs should reach 8 percent. In terms of technology innovation, the SMEs' expenditure in research and business development should take up a considerable proportion of their revenue, and a number of innovative SMEs shall be given full support. In terms of industrial structure, the SMEs' proportion in modern service industries, modern agriculture and hi-tech industries will rise significantly.

MIIT plans to establish or improve altogether 4,000 public service platforms in the next five years, 500 of which will be state-level SME demonstration service platforms. It plans to build up a SME public service network covering 80 percent of the country, and SMEs can share their resources and services there.

Possible remedies

How should enterprises cope with the predicament ahead? Although some companies are plotting new routes to success, or at least stability, many are waiting passively for the environment to turn for the better. Li said the SMEs should transform their development model and upgrade their structures.

"Entrepreneurs must be prepared for an extraordinarily tough external environment. Instead of being pessimistic, they should take concrete actions to change their development pattern. Under current internal and external pressures, they should actively promote innovation and industrial restructuring and upgrading, and it is totally possible for them to survive the economic downturn," Li said.

In spite of all the problems lying ahead on the road of development, China is still a vast market. Under conditions of insufficient overseas demand, exploring the domestic market has become the top priority for SMEs.

It is nearly impossible for the SMEs to shrug off all the problems on their own, said Li. The government should give sufficient support to SMEs and further improve the development environment for them. Li suggested the government form a special work group to evaluate the market access standard for SMEs and revaluate the approval procedures. The government should loosen control over certain market access and approval procedures and cut unnecessary administrative fees.

Li said the government should increase fiscal and tax support for SMEs and suggested a stair-type tax system for small and micro-sized enterprises. The government should help SMEs for their technology innovation and industrial restructuring, support the invention of technologies that cater to the needs of SMEs and provide better management and technology consultant services for SMEs. 

Email us at: lanxinzhen@bjreview.com

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