Home News Small and Medium-sized Enterprises (SMEs) Thrive in a Supportive Business Climate

Small and Medium-sized Enterprises (SMEs) Thrive in a Supportive Business Climate

Small and Medium-sized Enterprises (SMEs) Thrive in a Supportive Business Climate

By Beijing Review: On January 21, 10 days before the Spring Festival holiday (from January 31 to February 6 this year), the workshops of Baoji Saiwei, a heavy machinery manufacturer in Baoji, Shaanxi Province in northwest China, are in full swing to complete their orders. By late 2021, Saiwei had already received its orders for the first half of 2022. Deputy General Manager Li Hui told Beijing Review, “We need to deliver the products in time as well as explore new markets.”

That same day, in the capital of Beijing, Du Peifan, founder of ZhiqingFin, an artificial intelligence (AI) company focusing on smart speech services, was doing his routine work taking his employees through a checklist in service of their bank clients.

The next day, January 22, in Yiwu, known as the world’s largest wholesale market of consumer goods in the eastern province of Zhejiang, Wei Lingying, CEO of OMAWine International, a company importing Spanish wines and foods, is busy taking and delivering orders. Wei even struggled to squeeze in this Beijing Review interview.

Though operating in different sectors and playing individual roles in the market, all three are part of the most robust component of the Chinese economy-small and medium-sized enterprises (SMEs).

China’s SMEs, accounting for roughly 99 percent of all firms nationwide, are the main force behind China’s economic and social development. According to a 2020 report by the Ministry of Industry and Information Technology, over 50 percent of national tax revenue and 60 percent of GDP stem from SMEs. They create 70 percent of technological innovation and 80 percent of urban employment.

However, these companies do face many difficulties and concerns about their further development.

COVID-19 flare-ups, rising commodity prices, supply chain problems, and financing difficulties, among others, pose treacherous challenges.

The rising expenditures of importing wine and food products combined with a declining demand due to the pandemic put OMAWine International on edge. Compared to pre-pandemic times, wine orders decreased by 20 percent during this year’s pre-Spring Festival sales season, according to Wei.

On the plus side, all three companies are still alive, inspiring those willing to have a go at entrepreneurship.

Saiwei only halted production for a brief period at the very onset of the COVID-19 pandemic in early 2020 and soon resumed operations. “Like gears, we are the inseparable parts that guarantee the swift functioning of China’s industrial and supply chains,” Li said. “We, SMEs or private companies, could not simply give up and close up shop; we are not just enterprises, but also the economic backbone of our workers’ families.”

SMEs usually gather in competitive industries, making it essential for them to adjust their business models and actively find new growth opportunities in the new market environment, Zhang said.

Compared with large intelligent speech companies that provide only one standard product, ZhiqingFin’s customized services are better, especially in the post-sales field, according to Du. The pandemic has generally stimulated technological expansion, with AI now widely applied. Yet financing remains an issue. It’s a tough task for Du to increase company bankrolling to invest in technical capacity and service research.

Pan Gongsheng, Deputy Governor of the People’s Bank of China, the country’s central bank, said at a press conference in September 2021 that addressing the financing needs of SMEs is high on the agenda of the regulatory authority. Loans to micro and small firms totaled 17.8 trillion yuan ($2.75 trillion) as of late July 2021, up 29.3 percent year on year, according to Pan.

Hi-tech SMEs like Saiwei also receive financial assistance. As opposed to regular enterprises producing heavy machinery, Saiwei caters to specific customer requirements. Last year, it invested roughly 30 million yuan ($4.7 million) in research and development.

The company has been inducted into the Little Giant Firms program, covering small enterprises in their early stages of development, all focusing on high-end technologies. This could bring Saiwei millions of yuan in research support over the coming year. Du’s company, too, has applied for the program.

So what does the future hold for China’s SMEs? The answer is two-fold: Innovation-led and green development will be two key directions to promote their high-quality growth in the 14th Five-Year Plan (2021-25) period, according to a government guideline.

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