China’s Approach to SME Promotion through Public-Private Dialogue
The National Development and Reform Commission (NDRC), the Anhui Provincial Government and the German Technical Cooperation (GTZ) have jointly organized an International Symposium on SME Promotion: “China’s Approach to SME Promotion through Public-Private Dialogue on Policy, Strategies and Developing Models”. The symposium was held on June 29th and 30th 2007 in Hefei, Anhui Province, PR China.
As a result of the NDRC announced program for the promotion of small and medium-sized enterprises which sought to develop and establish a co-operative business environment for SME in China, Anhui Province presented the new tested models of cooperation and promotion of industrial locations.
The symposium provided a forum to discuss international policy approaches in the field of SME Promotion especially on public-private cooperation and to share knowledge and experiences from Anhui Province. In three plenary sessions and three interactive workshops, the following major topics were addressed:
SME Policy and Business Environment
Business Development through Modern Regional Strategies
Business Development Services (BDS) and Development of Chambers and Associations
More than 350 participants attended the event, including high-ranking government officials from the Anhui Provincial Government, representatives of international organizations as well as German and international experts and renowned experts and scholars from research institutes and academies. National and regional media reported extensively on the event.
China’s Draft Law on Sector Associations and Chambers has been discussed during the March plenary sessions of the National People’s Congress and the People’s Political Consultative Conference, but the legislative bodies failed to reach an early consensus. On April 5, 2007, the nation-wide newspaper “China Business Times” published the second part of an interview with the German expert Helmut Schoenleber who stressed the importance of non-government business membership organizations (BMO) for the healthy development of private enterprises. According to the expert, the country needs a fair BMO law protecting the interests of members and aiming for a wider self-administration of the private business community. For drafting the BMO law, legislators should not only consider the economic situation, national characteristics, demands of enterprises, and related laws and regulations of other countries, but they also need a fair portion of creativity.
The municipal government of eastern China’s city of 4 million, Hefei, capital of Anhui province, wants to improve the service system for small and medium-sized enterprises. On March 26, 2007, German GTZ organized a half-day expert hearing for leaders of the city’s economic commission and the municipal SME service center. Meng Xunzhi, director of GTZ Anhui office, and SEQUA-Expert Helmut Schoenleber participated and introduced SME service systems in western developed countries, which are largely based on the private business community and its membership organizations.
One of Germany’s well-known experts on corporate identity has accepted an invitation by SEQUA to introduce international best-practice models on branding and establishing a corporate image to small and medium-sized entrepreneurs (SME) during a symposium in the eastern Chinese province of Anhui.
Frank Merkel, founder and CEO of wob AG, held a presentation and participated in discussions in Hefei, capital of Anhui province, from March 19 to 21, 2007. The symposium was organized by the Anhui General Chamber of Commerce (AHGCC) and the Anhui Association of Private Economy, and supported by the German technical assistance organizations GTZ and SEQUA. The event aimed at providing guidance to owners of Chinese SME in developing their own brand strategy, at improving their conscience in corporate social responsibility, but also at assisting chambers of commerce and business associations in organizing high quality management training for their members.
World-famous brand enterprises such as BASF, Bosch, Heidelberg, Henkel, Hoffmann Group, Hyundai, John Deere, Mercedes-Benz und SAP are among the customers of wob AG. But Merkel has also successfully assisted many SME in developing their corporate identity.
Share of Gross Domestic Product to Exceed 50 Percent
Reluctantly legalized no earlier than in the mid-eighties, private economy has now grown to become the main power driving China’s economic development. The head organization of Chinese chambers of commerce and industry expects private businesses will contribute more than half to the country’s gross domestic product (GDP) for the first time this year. According to a “2006 Blue Book on Private Economy Development” published by All-China Federation of Industry and Commerce (ACFIC) on September 22, their share already reached 49.7 percent in the end of 2005.
ACFIC carefully distinguished between different definitions of “private economy”. The narrow definition only includes businesses who are officially registered either as private enterprise or as private small business. The wider “domestic non-state economy” also includes mixed companies of private, collective, and state ownership, as long as the state’s share is less than a controlling majority. Finally, the wide definition also includes all foreign-invested enterprises. The expected 50-percent-share of GDP was calculated for the “domestic non-state economy” definition.
Private economy already reached 60.0 percent of fixed assets investment last year, according to the blue book. The state economy took 30.6 percent, foreign enterprises 9.4 percent.
Development of private economy in the narrow definition was quite amazing during the past 28 years. Official statistics show that in 1978, the first year of China’s economic reforms, 140,000 people were employed by small businesses. The number of small businesses, however, was only listed starting 1981, when the administration of industry and commerce was established and took charge of registration. 1.8 million businesses were registered in 1981, and their number grew to nearly 25 million in 2005.
Small businesses were only allowed to employ up to seven people, usually the owner’s family members. If they wanted to grow further, they had to register as branches of state or collective enterprises and thus turned into enterprises “with a red cap”. In the second half of the eighties, a private enterprise law and a limited company law were passed and legalized more sizable private economic activities. But not before 1999, the existance of private enterprises turned into a constitutional right and the general public ceased to view private business owners as criminals.
In 1989, the administration registered 91,000 private enterprises with more than seven employees. This number grew to 4.3 million in 2005. Even more impressive, their retail sales grew from 74.4 billion Renminbi in 1987 to 1.9 trillion in 2005. Within 18 years, their sales grew 26-fold.
But the main reason for private economy to successfully move forward in an otherwise strict socialist system was their contribution to alleviate unemployment. 140.000 employees in the private economy of 1978 grew to 107 million in 2005. Private entrepreneurs are now constituing a powerful middle class. State and party have changed their policy of obstacles into a policy of support for the private economy.
In Western countries, “Business Angels” are networks of very experienced entrepreneurs and business managers who, after handing over their own business to the next generation, still feel active and are thus willing to support enterprise startups and young entrepreneurs. They contribute their management experience, their customer and political connections, and often even their own money.
In most cases, a business angel is not only philanthropic. He also enjoys the thrill of a new challenge, he likes to make good use of his well-developed skills, and by investing in a new and promising enterprise, he also aims at making some profit. Therefore, business angels networks not only help to increase the success quota of business startups, they also help senior personages to keep participating actively in social life and to receive commendation from society for it.
Governments and international organizations recognize the valuable role of business angels networks for an efficient and honorable change of generations both in economy and society in general. Many of them support the networks (thus not the individual business angels) financially.
In China, there are no such business angels networks as in the USA or in Europe. But senior personages contributing with their experience to important decisions after their retirement is a tradition here, too. This usually happens on an individual and informal basis, and its focus is on the family and close friends.
Since the history of private entrepreneurship is short (starting in the mid-eighties), the number of retired entrepreneurs who would be ideal business angels is very small. However, many still energetic government leaders were ruled into retirement during recent years, and more to come. Although they don’t have much money to invest in business startups, their connections and managerial skills could be extremely valuable for many young enterprises.
Business startups in China need mentors such as business angels just as urgently as their colleagues in the West. Senior personages in China need the respect of society for their truly valuable contributions after retirement even more then their colleagues in the West. As a platform for society’s commendations and to serve these two demands, China needs to establish a network for business angels.
We currently help to prepare such a network. We are aiming for a platform mainly to be used within China, but also allowing for foreign business angels to support business startups in China and vice versa. Our format will be trilingual Chinese, English, and German. If you are interested in contributing to the establishing of this business angels network in China, please contact us. Become a business angel for “China Business Angels!”
What are successful development strategies for private small and medium-sized enterprises in China? What should they learn from similar enterprises of developed countries? How important is a good strategy on corporate social responsibility (CSR) for private enterprise development? These and many more questions were discussed during a symposium from May 21 to 23, 2006 in Hefei. Over 100 well-known entrepreneurs from all over the province participated in the event, which was jointly organized by Anhui General Chamber of Commerce, the Anhui Association on Private Economy Research, the Government of Baohe District, and the Sino-German SME Promotion Project.
Soon after the National People’s Congress had passed the amended 11th Five-Year-Plan on March 14, 2006, the 14-sections outline of the plan was published on the internet by the Central People’s Government. The Chinese document was also made available by Xinhua News Agency — broken into 24 parts due to its size. An official English translation of the plan has yet to be found on the web.
To date, eight provincial governments have also published their 11th Five-Year-Plans on the Chinese internet. The five-year-plans are still the main development strategy papers of the party and the government for each region. These plans may thus be used to analyze the different focus and special emphasis put on certain industries, on private enterprises, small and medium-sized enterprises, and business membership organizations.
A simple word frequency analysis of the different published provincial plans indicates the wide variety in the importance governments put on market forces, the private economy, chambers of commerce and business associations. Our table shows the total number of Chinese characters in the regional plans (tables, charts, boxes, indices etc. have been removed to increase comparability), and the word frequencies for “small and medium-sized enterprises” (中小企业), “non state-owned” (非公有制), and “chamber of commerce” (商会 or 工商联).
A manual on international relations work for chambers of commerce and small and medium-sized enterprises has been published by Anhui General Chamber of Commerce. On 390 pages, the guide book describes in detail how to prepare delegation visits and receive foreign guests, also including all related laws and regulations. The publication was co-sponsored by the Sino-German SME Promotion Program.
The Anhui Zhejiang Chamber of Commerce held its second plenary membership meeting on December 18, 2005. A revision of statutes passed unanimously, and the president and vice-presidents were re-elected for five years. This chamber represents entrepreneurs from Zhejiang province who run businesses in Anhui province. The number of similar bi-provincial and bi-prefectural chambers has recently grown quickly throughout the country.
Keynote speaker Helmut Schoenleber gave a presentation on strategies and operations of chambers of commerce in Europe and America.
Vocational Education and Capacity Building for the Sustainable Development of Business Communities