Small Enterprises in

 

 

 

Shanghai

 

 

12^th Issue

（No.109）

Shanghai Small Enterprises Development Coordination Office           

September 18^th, 2007

 

Conference on Promoting Small and Medium Enterprises Development Held in Shanghai

---- The Growth Project of local small and medium enterprises has entered into the implementation stage.

 

On the afternoon of 27^th August, Conference on Promoting Shanghai Small and Medium Enterprises Development was held by the municipal government. Vice mayor Hu Yanzhao was present at the conference and made a speech. At the conference, Wangjian, director of Shanghai Economic Commission, introduced the work deployment of Shanghai small and medium enterprises development. Shou Ziqi, deputy director of Shanghai Science and Technology Commission, and Fan Yongjin, deputy director of Shanghai Financial Service Office, made speeches respectively on science and technology innovation service and financing credit service for small and medium enterprises; government leaders from Pudong New Area and Yangpu District responsible for this specific field respectively introduced their experience in boosting the development of small and medium enterprises. In this session, we publish an abstract from the conference speeches by leaders of Shanghai Science and Technology Commission and Shanghai Financial Service Office for your reference.

 

Building a Good Ecological Environment for Innovation and Releasing the Pioneering Vitality of Small and Medium Enterprises

----Shou Ziqi, deputy director of Shanghai Science and Technology Commission

 

The whole world is undergoing great changes and improvements everyday. As a key component of the innovation system, small and medium enterprises are of greater and greater importance in this era of knowledge economy and innovation. We learn from the experience of developed countries that small and medium enterprises have remarkable advantages over large enterprises in both innovation efficiency and innovation quality.

The same is true in our country. Taking up over 99% of the total number of enterprises nationwide at present, small and medium enterprises have become a key force in national economic growth and social development as well as a fresh troop in innovation. According to relative statistic data, among all the existing innovation output, around 70% of technology innovation, 65% of domestic invention patents and over 80% of new products are from small and medium enterprises. Still small and medium enterprises of our country generally face various problems in the process of innovative development, such as financing difficulties, poor legal environment, weak specialized services and so on. Our government and all walks of life should do something to build a good external environment for their innovative development.

Under the leadership of the municipal committee and the municipal government and in accordance with the specific innovation work deployment of small and medium enterprises by the State Science and Technology Ministry, we took advantage of “ministry-city cooperation” and “city-district interaction” and worked together with brother commissions and offices in providing a favorable “ecological” environment and good services for the innovative business launching of small and medium enterprises. We have carried out our work in the following 3 specific aspects:

1. Insisting on the “Integration of Point and Sphere”. Through perfecting public services for innovative business launching and establishing partnerships among superior small and medium enterprises, we have comprehensively elevated the innovative capability of small and medium enterprises.

On the one hand, in terms of “sphere”, we have given small and medium enterprises specific assistances catering to their different needs in innovative business launching via various ways including drawing up and implementing the innovation policy, building public service platforms, developing incubators for business launching, training CTO talents, supporting the innovation fund (capital) program for small and medium scientific and technological enterprises, etc. For instance, since 2000 we have invested 150 million RMB in the construction of incubating bases, incubators and platforms. By the end of 2006, the overall incubated area had reached 594,000 square meters, with 2,123 enterprises being incubated, cumulatively 481 enterprises already incubated and a total employee population of 33,200. Besides, in an effort to reduce the cost and risk of innovative business launching, since 2003, according to the basic framework of the National Science and Technology Basic Condition Platform and catering to the needs for innovative business launching of enterprises, research institutions and universities, we have built Shanghai Research and Development Public Service Platform consisting of 10 subsystems. By the end of 2006, 105,000 users had registered with the platform. It had served for 752,000 people-time, over 60% of which were from small and medium enterprises.

On the other hand, in terms of “point”, relying on the implementation of the “Scientific and Technological Little Giant Project ”, we have strengthened our assistance to superior innovative enterprises and have made great efforts in fostering leading innovative enterprises. Last year, with the joint issue of “Implementation Methods of Shanghai Scientific and Technological Little Giant Project” by Shanghai Economic Commission and our commission, the “Scientific and Technological Little Giant Project” was formerly launched. Different from previous actions in boosting small enterprise innovation, the “Scientific and Technological Little Giant Project” has integrated various policies on science and technology of small and medium enterprises and will give focal assistance to those small and medium enterprises with development potentials. All these will be beneficial to realizing the enterprise-assisting goal of “Selecting the Best From the Good and Fostering the Large and Strong Ones”. Following the requirements and standards of the “Implementation Methods”, we had selected 20 Shanghai Scientific and Technological Little Giant Enterprises and 50 Scientific and Technological Little Giant Fostering Enterprises by the end of 2006 to receive 80 million RMB government funding. The implementation of the “Scientific and Technological Little Giant Project ” provides scientific and technological small and medium enterprises with a series of supporting measures covering funds, programs, platforms, talents, etc. It helps enhance the overall innovative capability of enterprises and at the same time enlarges the advantages of those superior innovative enterprises over their competitors in the business.

2. Insisting on a diversified funding mode with special attention given to the break-through of the “capital bottleneck” small and medium enterprises face in innovative business launching.

Firstly, the municipal government has specially set up the “Scientific and Technological Business Pioneering Fund for University Undergraduates”, with a view to encouraging and assisting scientific and technological business pioneering of university students. The fund was launched in 2005, followed by the foundation of the “Business Pioneering Fund for University Undergraduates” in 2006. As planned, in the 5-year period from 2006 to 2010, a special funding of 100 million RMB will be allotted each year to support the business launching activities of university students. By the end of 2006, the 4 sub fund venues, Fudan University, Jiaotong University, Shanghai University and Shanghai Polytechnic University, had altogether accepted applications of more than 500 business-launching programs and had ratified funding projects to 164 pioneering enterprises. Now 132 of the funded programs have already registered with the Industrial and Commercial Bureau and the total registration capital reaches 71,846,000 RMB. Some of the funded enterprises have achieved rapid growth and development.

Secondly, from national and local innovation funds (capital), small and medium enterprises are subsidized in their technology breakthrough efforts. The Technology Innovation Fund (Capital) for Scientific and Technological Small and Medium Enterprises is a special government fund (capital) used to support the technology innovation of scientific and technological small and medium enterprises. It assists and guides technology innovation activities through allocating funds, offering loan discounts, investing capital and other ways. By the end of 2006, Shanghai had organized 2,765 programs to apply for the National Innovation Fund, of which 945 programs had been approved with a total supporting fund of 527 million RMB. Ranking the first place in China, small and medium enterprises of Shanghai have fully demonstrated their innovation vitality. In the meantime, Shanghai has invested more in the municipal innovation fund and has made efforts in finding and fostering promising scientific and technological small and medium enterprises. It has already financial supported 1,669 innovation programs of small and medium enterprises with a total fund of 273 million RMB.

Thirdly, the leverage of various government-backed business pioneering funds have been brought into full play in inviting all kinds of social investments in small and medium enterprises. Counting on Shanghai Science and Technology Investment Company and Shanghai Business Pioneering Investment Company, we have motivated various banks and investment companies to intensify their investments in scientific and technological small and medium enterprises. Taking innovation funds (capital) for example, monitoring statistics show that the National Innovation Fund and Shanghai Innovation fund have brought 1/13 of the input capital from bank loan, enterprise self-financing and other social investments. Thus a considerable number of scientific and technological small and medium enterprises have come into being, including Wei Chuang, Wanda, Zhan Xun, etc.

3. Insisting on all levels of cooperative promotion mechanisms and building an interaction framework that comprehensively supports innovative business launching of small and medium enterprises.

Firstly, through city-district interaction, various policies of small and medium enterprises haven come into existence. Since the holding of the Science and Technology General Assembly, and especially since the execution of innovation performance examining among district and county leaderships, all district and county governments have intensified their support to small and medium enterprise technology innovation and have set aside in their finance special funds for technology innovation. The fund scale has been keeping expanding with the total amount now exceeding 300 million RMB. Under such circumstances, we have tightened our communication and negotiation with districts and counties. Focusing on “innovation hot spots”, we have given assistance to innovative business pioneering of small and medium enterprises within distinctive industries and have thus promoted transformation in district and county economic developing patterns.

Secondly, through more and more ministry-city cooperation, we have assisted scientific and technological small and medium enterprises in undertaking national strategic programs. Launched in August 1988, the “Torch Project” is the country’s major strategic project in boosting the transformation of high-tech industry achievements and the development of small and medium enterprises. From 2001 to today, we have helped numerous small and medium enterprises apply for the Torch Project. Altogether 335 programs, 22 key programs and 42 small and medium enterprises were declared and consequently 189 programs, 9 programs and 18 small and medium enterprises have been approved by the Torch Project. The implementation of these projects and programs has effectively supported ministry-city cooperation and has at the same time actively promoted the development of Shanghai high-tech small and medium enterprises and the adjustment of industry structure.

Thirdly, through strengthening international exchanges and cooperation, we have geared small and medium enterprises to international standards. We have constructed international-standard incubators and have actively carried out the strategy of “Inviting In and Going Out”. Till today direct partnerships have been established with over 10 countries and regions including France, Britain, Japan, Korea, Russia, etc. Since 1998 we have also successfully undertaken 9 international training sessions on enterprise incubators, participated by over 200 overseas incubator managers from over 30 countries. Besides, a number of scientific and technological small and medium enterprises including Sheng Jing have successfully landed onto incubators overseas. A developing course towards internalization for scientific and technological small and medium enterprises is under progressive exploration.

It’s been proved through practice that small and medium enterprises constitute an organic component in the construction of the city’s innovation system and make a key link in improving its autonomous innovative capability. However, we have also noticed many obstacles and constraints existing in the developing course of small and medium enterprises. For instance, small and medium enterprises still face difficulties in such issues as further perfection of the investment risk withdrawing mechanism, acceleration of interaction and cooperation with other scientific and technological innovation subjects and so on. Next, on the basis of our present work, we shall follow the general deployment of the municipal committee and the municipal government, work together with brother commissions and offices and further carry out various assisting policies for innovative business launching of small and medium enterprises. With all our efforts, we will provide small and medium enterprises with services that are more complete, more professional, more convenient and more individualized so as to upgrade their autonomous innovative capability, and at the same time make greater contributions to the realization of the “Four Initiatives” and the construction of the “Four Concentrations” of Shanghai.

 

 

 

 

 

Creating Favorable Financial Environment and Promoting Financial Service to Small and Medium Enterprises

---- Fan Yongjin, deputy director of Shanghai Financial Service Office

Under the guidance of the Municipal Committee and the Government of Shanghai and making joint efforts with Shanghai Economic Commission, Shanghai Science and Technology Commission, Shanghai Small and Medium Enterprise Coordination Office, Shanghai Financial Office has in the past few years relied heavily on supervision institutions such as the Shanghai Headquarters of People’s Bank, Shanghai Monetary Supervision Bureau, Shanghai Securities Regulatory Commission in the endeavor to fully exercise the functions of financial institutions,  to create a favorable financial environment and to proactively boost financial services to small and medium enterprises.

 

1.      Constantly Intensifying the Credit Service of small and medium enterprises

Firstly, the enhanced credit guidance for small and medium enterprises on the part of financial regulatory agencies: 1. The Shanghai Headquarters of People’s Bank of China issued in 2006 “Guidelines for Monetary Credit in Shanghai”, clarifying the orientation to put into key credit prop-up list those small and medium enterprises with good market share, high efficiency and good credit and to further commit to making priority titled towards small and medium enterprises. The latest revised “Credit Guidelines in Shanghai” in 2006 clearly defined in the credit priority category: The city of Shanghai is committed to “the promotion of self-innovation on the part of enterprises and the boosting of the development of high-tech enterprises and advanced manufacturing industries”. Also, it was clearly stipulated in the credit priority list that the city of Shanghai would work in support of the development of small and medium enterprises and the economy of the non-public sector. 2. Shanghai Monetary Supervision Commission, making the “6 mechanisms” of small enterprise loans as its core responsibility, helped and afforded guidance for the banking industry in the establishment of sustainable commercial loan mode for small enterprises. It staged comprehensive and multi-leveled activities to urge the banking industry to intensify its financial service for small and big enterprises. 3. In June 2008, Shanghai Monetary Supervision Committee, Shanghai Economic Commission and Shanghai Financial Office jointly gave guidance to 20 Chinese and foreign-funded commercial banks in their hosting the “Financial Service Fair and Publicity Week for small Enterprises by Shanghai Banking Circle” event. Shanghai Small Enterprises Development Coordination Office and Shanghai Business and Commercial Association were co-organizers of the event. They helped in the organization of enterprises and in policy consultation. With more than 2000 enterprises taking part in the on-the-spot interaction, the event resulted in good results. In 2007, the above mentioned institutions again jointly launched the successful “Financial Service Fair for Small Enterprises by Shanghai Banking Circle”, which helped to channel a mode for interaction and communication between small enterprises and financial institutions. Through face-to-face contacts, the finance bottleneck of small enterprises could be settled.

Secondly, financial institutions in Shanghai have strengthened its credit support to small, medium and big enterprises. Under the promotion of financial supervision commissions, they have strived to transform their business concept, to greatly carry out innovation in financial service products, to meet the individualized financing need of enterprises, which to a large extent improved the credit and financing environment for small and medium enterprises.1. More and more banks in Shanghai have listed the financing service of small and medium enterprises as one of their work priorities, with Construction Bank, Bank of Communications, Bank of China in particular. These banks, who used to set high service conditions for enterprises now take the initiative in offering services to small and medium enterprises. The Shanghai Branch of National Development Bank, which originally only focused on loans to science-and-technology-oriented small and medium enterprises, now started new loan products catering to average small and medium enterprises together with some guarantee agencies. China Import and Export Bank adjusted its export condition from 5 million US dollars to 2 million US dollars and increased its loan channels to export-oriented enterprises. 2. Many banks, according to their specific needs in business and structure transformation, set up special sections and arranged specific personnel for specified financial service and management of small and medium enterprises. Chinese banks, which have set up departments for the service of small and medium enterprises include Pong Dong Development Bank, Ming Sheng Bank, Industrial & Commercial Bank, Ever Bright Bank, Bank of China while those foreign-funded ones, which have started the same service, include Chartered Bank and De Futai Bank. 3. Financial institutions in Shanghai have actively involved themselves in innovation, extensive exploration of new financial products to cater to the need of small and medium enterprises. In 2006, Shanghai Banking circle quickened its steps in innovation and brought out 56 (a series) items as financing products for small and medium enterprises, trying hard to meet the financing needs of small and medium enterprises with various business types and in different phases of development. For instance, it did some reform to the original unsystematic financing products and have been able to offer package financing services, namely, the increase of impawn means, acceptance of guarantee from guarantee institutions, the impawning of movables, the impawning of personal assets, etc. Apart from that, the banking circle did reform in internal workflow and has shortened the time for processing loan application.

The credit business for small and medium enterprises has undergone great progress in the past few years. According to estimation, Chinese banks in Shanghai have up to June this year given an outstanding of loans of 188.433 billion RMB to small and medium enterprises, an increase of 3.135 billion, making up some 11.3% of the total outstanding of loans compared with the same period the previous year. The credit extension totaled 221.367 billion RMB, an increase of 6.795 billion RMB. The number of small enterprises, which have been offered credit extension, reached the figure of 22998, an increased of 604.

2.      The steady Formation of Credit System of small and medium enterprises

The setting up of the credit system of small and medium enterprises is of benefit to the cultivation and intensifying of credit conscience on the part of small and medium enterprises, to the regulation and improvement of various regulations of small and medium enterprises, to the establishment of long-term ties between small and medium enterprises and banks and it is therefore of great significance in helping constitute the credit information collection system and the mechanism of penalty in case of credit breaches.

Since 2006, the Shanghai Headquarters of People’s Bank actively organized commercial banks to establish credit files for rising small and medium enterprises that need credit. Meanwhile, it sought support from related government institutions, various industry associations in the setting up of long-term mechanism for credit file recording of small and medium enterprises. By the end of December 2006, the city of Shanghai altogether gathered 1626 credit files for small and medium enterprises, among which 1004 were without loan notes. The collection number ranked the first among the experimental municipalities directly under the Central Government while the information quality ranked the 2^nd among trial districts in China.  

To help banks identify enterprise risks, the Shanghai Headquarters of People’s Bank actively boosted the credit appraisal of enterprises with bank loans. 3292 enterprises joined the activity. Shanghai Monetary Bureau explored the possibility of setting up the notifying mechanism of loan agreement violations of small and medium enterprises in an effort to help the bank to control credit risks. The fine capital quality has secured the guarantee for sustainable development of financial services to small and medium enterprises by Shanghai Banking circle. Statistics show that up to June this year, the non-functional loan of small and medium enterprises from Chinese banks was 6.14%, a drop of 1.09%.

With the improvement of the credit system of small and medium enterprises in Shanghai, the credit guarantee system of small and medium enterprises has been developing fast. By the end of 2006, guarantee institutions of various natures in Shanghai reached 89. The financing guarantee balance of small and medium enterprises was 10.007 billion RMB, 70% more than that of 2005.

3.      Steadily promoting the direct financing of small and medium enterprises

Since last year, with the equity division reform of listed companies being basically completed, the financing function of China’s capital market got restored, creating favorable conditions for small and medium enterprises to rely on the securities market to make great-leap-forward progress. Shanghai Financial Office, Shanghai Small Enterprises Development Coordination Office, Shanghai Securities Supervision Commission and some other establishments cooperated closely with one another. Through mobilization, training, coaching and other means, greatly urged small and medium enterprises to seize opportunities to do direct financing. In 2006, Shanghai Wei Er Tai Industry Automation Company Limited became the 1^st Shanghai Company among small and medium enterprises to be listed in Shenzhen Stock Exchange after reform. Since the beginning of 2007, small and medium enterprises in Shanghai have stepped up their effort to be listed in the stock exchange. Now we have Shanghai Hai Chen Engineering Science and Technology Company Limited, Shanghai Han Zhong Superfinishing Machine Company Limited. Shanghai Smic Architectural Ceramics Company Limited, which have finished new stock issuing and become listed. The above three companies altogether raised 98.3 million RMB. 4 other small and medium enterprises have applied for new stock issuing and their files have been submitted to China Securities Commission for check and approval. Besides, some small and medium enterprises in Shanghai have been listed in overseas capital markets. Apart from IPO capital collection, Si Yuan Electric Company Limited, one of the small and medium enterprises in Shanghai, seized opportunities in the development of the capital market and raised 400 million RMB through additional tailored-purpose issuing of stocks, hence, the quickening of its expansion.  

Along with constant breakthroughs in the capital market, financing through investments in stocks of small and medium enterprises is undergoing rapid development as well. The favorable policy guidance and sustainable economic environment in Shanghai have attracted concentration of pioneering capital. According to the information from Shanghai Pioneering Investment Association, by the end of 206, there had been 185 pioneering investment institutions in Shanghai. The total pioneering investment capital is about 25 billion RMB. In 2006, the pioneering investment in Shanghai small and medium enterprises also rose by a big margin. According to related report, the city of Shanghai attracted in 2006 81 cases of investments, totaling 347 million RMB, which doubled that of 2005.

In recent years, the financial environment for small and medium enterprises in Shanghai has been remarkably improved. Financing services for small and medium enterprises have been improved, too. However, financing difficulties for small and medium enterprises haven’t been thoroughly settled. For instance, the rate of direct financing of small and medium enterprises remain low and the financing of micro-enterprises is difficult. The impawn credit modes have yet to be broken through. The cost of financing for small and medium enterprises tends to be on the rise. Together with relevant commissions in Shanghai, the Shanghai Headquarters of People’s Bank, Shanghai Monetary Supervision Commission, Shanghai Securities Bureau, etc., we shall further promote financial services for small and medium enterprises according to their specific needs. We shall soon launch the movement of direct financing of small and medium enterprises through the capital market via the implementation of Shanghai incubation projects for enterprise reform and listing.

The capital market plays an extremely significant role in promoting national economic growth and enterprise development. It not only helps small and medium enterprises raise funds, but also functions in transforming enterprise mechanism, optimizing resource allocation and fulfilling wealth effect. Since the beginning of this year, China Securities Regulatory Commission has been putting key emphasis on the progressive construction of an all-level market system, with a view to perfecting the structure and the function of the market. While the main sections of the stock market are being prioritized, the Small and Medium Enterprise Section is also developing rapidly. Since the re-issuing of small and medium enterprise new stock in June 2006, the number of enterprises in the Small and Medium Enterprise Section has increased from 50 to 163. Besides, the founding of the Business Launching Section has also been brought up on the agenda. It’s been proved through practice that those competent small and medium enterprises can bring about an all-win situation through listing onto the stock market---- the local government has achieved more economic added value and taxation, the enterprises have built a platform for merger and acquisition during business expansion and the business pioneers have accumulated more wealth in less time. Small and medium enterprises of Shanghai have enhanced their consciousness of direct financing and we shall further strive to encourage them to seize the timing to get listed onto the stock market for development. It’s our sincere hope that via the capital market more and more small and medium enterprises in Shanghai can grow into elites in their own fields, promote the economic increase of the city and at the same time realize value maximization through listing onto the stock market.

 

 

Editors of the present issue: Song Xiaohui, Zong Yuan