Up to date, private small and medium enterprises are playing an increasingly more and more important role in Guangdong's economic development. Guangdong's private economy has been taking the lead in China all along and had kept growing at a high speed.

The Small and Medium Enterprise TV-Forum, 2003 ICCFED, themed "Development of Guangdong SMEs", is held on Tuesday (November 4th).

The guests attending the forum are experts closely related to SMSs. They are:

Professor Patrizio Bianchi is an international advisor of Guangdong governor. At present, he is the chairman of Institute for Industrial Development Studies as well as a professor of Universit di Ferrara.

Mr. Liu Huanquan, vice director of vice director of provincial economy and trade committee and director of SME bureau, has been involved in economic administration sector for over thirty years.

Mr. Lan Hailin, dean of the Institute of Business Administration of South China University of Technology, has been long devoted to the academic research on enterprise strategy.

Miss Xu Xia is the director of the Service Center of Small and Medium Enterprises.

Mr. Yao Liangsong is the Board Chairman of Guangzhou Oupai Cabinet Company Limited.

Q: (for Director Xu Xia) What do you think is the origin of the financing hurdles issue of SMEs.

A: SMEs have their own weakness, and there is also some problems of external financing environment. For SMEs themselves:

1) With high self-owned capital, the capital flows of the SMEs are few.

2) The level of financial administration and internal control system of the SMEs are still unsatisfactory.

3) Loan on mortgage and loan secured are also difficult for SMEs.

4) SMEs do not have enough consciousness of social credit conception.

Regarding the external capital, there are not enough tools for direct financing and the construction of SME financial institutions lags.

Background: Financing Hurdles Issue of SMEs. Because of the unsoundness of the credit administration system in the SMEs and the immatureness of the credit guarantee systems for the SMEs, the banks negatively decreased their enthusiasm for providing loans to the private enterprises. At present, the inconvenient approach of direct financing cause that some private enterprises, which own valuable projects, markets, and technologies, couldn't develop rapidly. The specific examples are, firstly, middle and long-term financing is inconvenient, and the long-term capital of SMEs is severely scarce. Basically, at present, the expired date of the bank loan for SMEs is no more than one year, so the loan they get can only be used to fill up the gap of the current capital. Secondly, the scarceness of small-sized capital market brings about difficulties for SMEs to finance directly. As the admittance for the domestic capital market is strict and the relevant administrational criterion is gradually founded, most of the private SMEs cannot find their way to get bankroll in the capital market directly. Thirdly, the unofficial borrowing activities are comparatively active, but their scales are normally kept small. For SMEs, especially for private SMEs, it is not easy to get bankroll in formal way; as a result, they have to turn around to informal channels in the financial market, including civilian borrowing-and-loan market, private collecting capital, and mutual guarantee and etc.)

Q: (for Director Xu Xia) What are the specific representation of the "fiancing hurdles issue"?

A: I would like to give you two examples:

1) As there are not much capital that can be mortgaged and secured, it is difficult for SMEs to provide loans.

2) SMEs only have a single channel of loaning. The amount of loans is much limited, so they cannot have one-step development.

Background: Soft Infrastructure of Development Issue of SMEs. Aiming at the broadly attentive developing and surviving environment issue facing private SMEs, the Social Affair and Public Opinion Researching Center of Guangzhou city did a special survey at the beginning of this year. 557 private SMEs, at diverse scales and from different industries, remarked on the service condition of 18 official departments in Guangzhou. The opinions focused on low efficiency caused by miscellaneous working procedures, overburdensome charge, and lack of serving consciousness. The mainly three aspects are as follows; the working procedure is complicated, excessive, and there are overlap administrations among the different departments. B. The charges are unreasonable, excessive, unclear, overlap and high. C. The official departments are lack of serving consciousness, the administrator's attitude is stiff, the information is not transparent or open, and the working way and style problem still exist.
 

Q: Prof. Bianchi, is there the same problem facing SMEs in your country? What are the solutions adopted?

A: Yes, SMEs have the same problems in Italy, too. But, in these last 20 years, several supporting institutions have been established, in order to help SMEs facing the financing shortage. Some examples are the so-called Consorzi Fidi (Consortia for lines of credit) and Casse Artigiane (special program for craft firms). These institutions have the aim of decreasing the risk and to induce banks to grant credits also to small firms. They are organizations wanted by business associations in order to help the single small firms so that they do not have to face the finance problem on their own, but all together as a territorial system. The regional governments have strongly supported these guarantee consortia system, which has facilitated both firms and financing institutions.

Background: Technology Innovation Issue of SMEs. The serious shortage of the capital source is a typical problem facing SMEs in the technology innovation. According to the questionnaire made by the Development and Research Center of State Council on Guangdong, Liaoning, Hubei, and Yunnan Province, it showed that there were 66.9% of SMEs believed that the capital shortage was the primary problem restricting the technology innovation. Because few of SMEs can get bankroll from the capital market or financial institutions to innovate the technology, it is hard for SMEs to enter the realm of technology innovation. Moreover, the capital acquired by SMEs from the government to innovate the technology is extremely limited. The next, most of the science and technology-researching people are centralized in big-sized enterprises instead of in SMEs. Meanwhile, the employees in SMEs are mainly the surplus labor force from the rural and the new labor force from towns and cities, which are not well educated, lack of technique skills. Therefore, this severely affects the activities for SMEs to innovate the technology. In addition, the cooperation relationship between SMEs is weak. In the process of the development, they are lack of technology and information communication, and have not set up the relevant specialized division and cooperation, technology and marketing network.

Q: (For Director General Liu Huanquan) Is there any instructive policies for the solution of this problem?

A: Two aspects of work have been carried out by the government:

1) The government actively promotes the construction of del credere system and expands the channel of financing for SMEs. At present, a document named "On Speeding the construction of del credere system for SMEs" is being established by the Provincial SME Bureau.

2) Bank-Enterprise Cooperation Conferences are held to promote the communication between the two.

Background: Management Innovation Issue of SMEs. In the development of SMEs, the family style of management naturally set up. Although this is necessary, as a consequence, the old conception and the scarceness of management consciousness restricted the management innovation of SMEs. Currently, the capital structure of monopoly-share mode widely exists in the private enterprises. The owner is also the operator at the same time. The inner management and decision-making in the enterprises are decided all by big shareholders, which restricts consign and proxy relationship running smoothly under the modern company system. The typical examples are as follows, A. The family style of management and personnel system seriously prevents the quality of the enterprises from promoting. B. The limited ability of the decision makers think much of operation but despise management; and this leads to a low quality of decision, increasing the lapse, and further seriously slowing down the speed of developing. C. There are few efficient stimulation and restriction, so the award-and-penalty system is hard to be carried out. D. The family owner mode of working style makes the employees lack of owner consciousness, and their wit and brightness cannot be fully used, their innovation ideas cannot be realized finally.

Background
 
Private small and medium enterprises are playing an increasingly more and more important role in Guangdong's economic development. Guangdong's private economy has been taking the lead in China all along and had kept growing at a high speed.The statistics showed that up to the end of August this year, there were 1,827,100 individual businesses, with the employees of 3,812,600, the registered capital of RMB39.504 billion, and there were 290,300 personal enterprises with the employees of 3,021,300, the registered capital of RMB 394.319 billion. All of above figures reached the top among the provinces in China. There are 8,460 large-scale private enterprises in Guangdong province and their main economic index are all higher than others. The gross industrial output value (IOV) of the private enterprises in Guangdong reached RMB 190.68 billion, accounting for 16.7% of the total IOV increase and 4% of the industrial increase of Guangdong. The private enterprises turned in RMB35.077 billion state taxes, accounting for 26.25% of Guangdong's state tax; and turned in RMB 9.152 billion local taxes, accounting for 14.09% of Guangdong's local taxes. The number of private import-export enterprises in Guangdong is 11,031, which accounted for 64.8% of the total number of the import-export enterprises in Guangdong. From January to August of this year, the combined import and export value of the private enterprises in Guangdong reached US$ 12.784 billion, which accounted for 45% and 32% of the total value of China respectively. In addition, there are 30 private enterprises from Guangdong, which have invested in industries outside national boundary; the total investment reached US$ 14.058 million. At present, in terms of the size, mostly private enterprises in Guangdong are SMEs. Along with the gradually developing and expanding of SMEs in Guangdong, specialized-town economy, which was based on private enterprises, developed quickly. Especially in Pearl River Delta and its east and west circumambient region, there are some specialized towns which are leading at manufacturing featured products, gathering many upstream and downstream private enterprises together, forming comparatively consummate manufacturing, distributing, and offering compound service system. Their products are famous in the domestic and overseas markets. For instance, in Nanhai District of Foshan City, there have already been 12 specialized towns possessing the dominant position on the aspect of industry and size. Last year, the GDP of these towns was more than RMB 90 billion, accounting for 90% of the total industry value of Foshan city. Especially in Dali town, there were more than 400 aluminum section steel production lines, with the yearly output of 500,000 tons, accounting for 40% of the total output in China.

Although the private enterprises in Guangdong have kept increasing at a high speed all along, in the process of developing, they all meet several universal problems, and these bottleneck problems straightly constrain and prevent SMEs from developing healthily.

Editor: Donald