Companies
SMEs need to have more than courage
By Karen Yip (China Daily)
Updated: 2010-07-29 10:20
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A worker processes cotton yarn at a textile factory in Jiangsu province. [Xu Ruipin / For China Daily] |
Despite limited help from the government, the largest employer across China faces an uphill battle
BEIJING - US-trained chemist Wang Xiaochuan's Sundia MediTech Company Ltd - a private, Shanghai-based clinical research firm - enjoys brisk business even during tough times, thanks to a continuous flow of contracts from renowned drugmakers, partly boosted by the recession-proof pharmaceutical sector.
What was started six years ago by a group of Chinese returnees who are medical practitioners - and was once considered ambitious, new and daring in China - is now a much sought-after business model.
Global drugmakers are known for outsourcing research for drug discoveries to contract research organizations. As a contract research organization, Sundia's services help drugmakers slash costs up to three-fold when compared to their peers in the United States, Wang claimed.
Stronger-than-expected growth of new clientele ensured Sundia's revenue to jump 50 percent this year alone, up from its annual average of 30 percent. Currently, Sundia employs 500 skilled workers, has low staff turnover, is debt-free, enjoys robust orders from its multinational clients and has a strong, professional management team from diverse backgrounds, Wang claimed.
Figuratively speaking, this success story from a small company is one in a hundred in China.
How much is enough?
To date, China has over 50 million small- and medium-sized enterprises (SMEs), which account for 80 percent of the country's jobs, 60 percent of gross domestic product (GDP) and half of the national tax revenue, according to the Ministry of Commerce.
One of the important factors for businesses' survival is the availability of a healthy cash flow. Yet for SMEs, maintaining a positive cash flow is often far from their reach.
Despite government measures to assist SMEs, the amount of funding and further tax reductions continue to nag officials.
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"The size of the fund is clearly too small for this huge country with millions of qualified technology-based SMEs," said Ge Dingkun, assistant professor of strategy and entrepreneurship at the China Europe International Business School (CEIBS).
He suggested a common practice among foreign private equity firms and venture capitalists. "The government could have funds for different technological fields, for different industries and for different development stages."
However, the key challenge is to ensure the effectiveness and efficiency of the usage of these funds by SMEs.
"I have locally developed technologies that are cheaper and can rival the quality of foreign companies, and I provide employment to China's best," said He Yuanping, chief financial officer at Beijing OriginWater Technology Co Ltd, a water treatment services SME listed on the Shenzhen Stock Exchange.
"Government support usually goes to State-owned enterprises, universities and research institutes. But who is really at the forefront of the economy?" he asked.
Beijing enacted a slew of expansionary fiscal and monetary policies last year to counter the impact of the global financial crisis, including generous tax reductions for SMEs, making it easier for them to get loans.
All these measures seem to have brought China through the impact of the global financial crisis as the country recorded GDP growth of 11.9 percent in the first quarter this year after 8.7 percent growth in 2009.