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Small firms fight for recognition
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Wu Yan
NINETY-NINE per cent of Shenzhen's 10,000-plus enterprises are small or medium-sized, and they account for half the city' economic activity. SZ Municipal Economic Development Bureau has designated 2001 the "Year of Small and Medium-sized Businesses", with an aim to ushering them onto an "expressway of regulated and healthy development".
The first month of the year saw a convention of seleted enterprises of this type, sponsored by the SZ Municipal Economic Development Bureau. As a matter of fact, the convention was the first of its kind ever held in the city.
One of the bureau's goals this year is selecting 20 companies out of the 100 currently receiving the city government's special support. The selected, with more effective support from the city, are expected to evolve into "little giants" in three to five years, earning a yearly revenue of 500 million yuan (US$60.6 million).
Internal reform
Many of SZ's small and medium-sized businesses are controlled by individual private families, which is considered unhealthy for management and long-term development. Therefore, introduction of modern corporate systems based on reforming and readjusting current legal structures will be necessary.
Another weak point identified is in financial management. Executives agreed that the State's preferential policy, venture capital or the second board stock market will certainly target businesses with scientific, regulated and transparent financial management. On the other hand, many of these enterprises have yet to adopt strict and standardized financial management to become bigger and stronger and involved in the capital market.
It was also agreed that most of the represented businesses were built up from nothing by individual entrepreneurs. That has resulted in some top executives acting on an ad hoc basis, with insufficient quality control.
"Someone once made a huge fortune from real estates in Hainan, but soon lost it all because of his wilful investment afterwards," Zong Di, president of China Yinking Company Limited, told Shenzhen Daily, citing some business leaders' unwise decisions based on arbitrariness rather than scientific analysis and consultation.
Difficulties
These enterprises have long had difficulty obtaining loans, talents and information, problems which have held back their expansion.
Executives say thy have had to fight fierce battles for loans for many years. Although last year witnessed over forty of these businesses being granted loans by the city's credit guarantee center for small and medium-size enterprises, the gap remains. The heads of these firms say their businesses not have large land holdings to use as collateral and that few bigger enterprises are interested in underwriting them. This, combined with a lack of credit rating, makes it difficult to get loans from commercial banks.
"I believe venture capital would be an ultimate solution. And I hope that government can help foster a good environment where venture capital can play a bigger role as well as build a bridge between our enterprises and the (venture) capital, making the capital more accessable to us," said Xiao Shouqing, chairman of SZ Guanzhi Telecom-Tech Company Limited.
Executives interviewed also expressed their hope that the credit guarantee center would explore other possibilities that may enable them to use their facilities, vehicles or even advance them cash based on future earnings.
Another problem haunting them lies in hiring talents.
Some executives identified three causes in this regard: weak financial capability, weak all-round strength and having no right to apply for talent quota. Sometimes, though, they do succeed in obtaining the needed people from other regions of the country. But these people, after having gained a firm footing in Shenzhen, often leave and have themselves re-employed by other companies that can provide them with higher salaries and better benefits.
Private enterprise owners also called on the city government to improve its personnel system, and even suggested enactment of legislation to limit flow of talents on the basis of protecting the interests and commercial secrets of the concerned businesses.
Fortunately, in early February, the city announced new policies aimed at attracting more talents from other parts of the country and the world. Shenzhen is now competing with other cities—Shanghai in particular—in attracting talented people. The new policy features abandonment of some old practices that have served to impede the access to Shenzhen of those who hope to become permanent SZ residents. More importantly, the new move will put all enterprises and institutions on an equal footing with the big State-onwed companies in recruiting talents so long as they have the status of a legal entity, regardless of their ownership, size and history.
The third frustration faced by many of the small and medium-sized businesses is that in an "information-explosion" society they are unable to find out in time about new government policies and decrees related to them, or for that matter important economic and trade information. Some executives grumbled that their insufficient human resources and lack of financial and technical strength have damaged their ability to acquire needed information, leaving them often ill-informed. Governmental agencies usually do not notify or alert them on important events as they do the big enterprises. They can only get information secondhand, through the mass media and other channels.
Eeconomic strength
None of the nearly 100,000 enterprises stands out conspicuously on its own. But tied up together, they are greater than the sum of their parts.
Their total output value accounts for 65 per cent of the city's total, and their revenue, total amount of profit and general assets make up respectively 62 per cent, 51 per cent and 50 per cent. Furthermore, over 86 per cent of the city's employed population are in these enterprises.
Shenzhen is noted for its high-tech development. So far, the SZ Science and Technology Bureau has designated more than 100 companies as high-tech firms, among which 70 per cent are small or medium-sized enterprises. They have become an indispensable part of the city's economy and have attracted more and more attention from international venture capital institutions.
Appealing for fair competition
The executives could not hold back their gloom on the subject of market competition. They asked for a just, open and fair competition environment, insisting they are not treated as the equals of big companies. Shou Peiping, chairman of SZ Dispating Fashion Limited, voiced a hope by saying: "I hope it will become easier (for us) to talk to government officials, and that we'll encounter fewer unnecessary troubles (when dealing with them)".
Small and medium-sized companies, the private ones in particular, are more weakly linked with the government than the State-owned firms. They likened their enterprises to "stepchildren". While the State-owned businesses can go to the government for help when they have frustrations, the "stepchildren" can only depend on themselves in a similar situation.
Prejudice against these enterprises has long been a headache for these enterprises. For example, they are seen as easy to take advantage of through loopholes in the law or downright illegal activity. Therefore, tacitly or not, they are sometimes blocked from gaining market access, getting approval for their various applications and entering bids. Unfair competition, regional protection policy and monopoly by big businesses have all affected these small and medium-sized companies.
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