China SMEs

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By Dawei Cheng, Beijing WTO Affairs

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China SMEs

  1. 1. China SMEs: Today’s problem and future’s cooperation Dawei Cheng UN Trade Point Beijing Beijing WTO Affairs Center School of Economics,Renmin University of China
  2. 2. China SMEs <ul><li>The role of China SMEs </li></ul><ul><li>Where we are </li></ul>
  3. 3. SMEs play a key role in job creation and social stability maintenance <ul><li>In China’s urbanization process(which may last at least for 40 or 50 years) 400-500 millions jobs must be created in non-agricultural sectors, therefore, no matter in the long term or in the short term, the SMEs will continue to be the places absorbing the labors from country. </li></ul>
  4. 4. SMEs plays a role in upgrading industrial organization level <ul><li>After WTO accession, more and more foreign companies come and invest in China, international competition on Chinese market has started, such competition and cooperation make China SMEs more stronger. </li></ul>
  5. 5. Size of China SMEs <ul><li>More than eight million SMEs, accounting for 99 percent of China's total enterprises, account for 60 percent of the nation's industrial output and exports. These enterprises also employ three quarters of the labor force . </li></ul>
  6. 6. The world industry chain <ul><li>注 : FD: 食品 , TX: 纺织 , PP: 纸浆 , 纸和木柴 , CH: 化学制品 , CR: 陶瓷 , ST: 钢铁 , 有色金属和金属制品 , GM: 通用机械 , EM: 电机 , CE: 家用电器 , TM: 运输机械 , PM: 精密设备 ,MT: 各种小商品和玩具。 </li></ul>
  7. 7. China’position :where we are FD 食品, TX 纺织, PP 纸浆, CH 化学制品, EM 机电, CE 家用电器
  8. 8. <ul><li>China SMEs have comparative advantages in foodstuff, textile, furniture such labor-intensive industries, these industries are also major sources of China’s trade surplus. </li></ul>
  9. 9. <ul><li>In capital and technology intensive industries, like ordinary machinery, chemicals, telecom equipment, paper-making, they are also many SMEs. </li></ul>
  10. 10. Problems we are facing <ul><li>Governmental problem </li></ul><ul><li>Trade problem </li></ul><ul><li>Self problem </li></ul><ul><li>…… . </li></ul>
  11. 11. Government side <ul><li>The government’s function-transition faces some challenges. Market economy requests strict prevention against cheating behaviors in commodity production and exchanges, thus the government undertakes a heavy supervision and administration task of maintaining market order. The government has a long way to go. </li></ul>
  12. 12. SMEs belong to the society’s weak group <ul><li>The SMEs are weak and should get more support from government. But now the SMEs do not have necessary legal protection and their social burden are heavy. In some Chinese ares, the local government does not service the SMEs whole-heartedly, but are enthusiastic about establishing more SMEs. </li></ul>
  13. 13. Scale is not economic <ul><li>The SMEs industrial organization faces some challenges, like their scale is not economic. Small textile factories, small paper makers… throughout the country, causing many problems, like environmental problem. </li></ul>
  14. 14. Lack capital <ul><li>In China, private firms produce about 30% more output with the same capital, labor, and materials than SOEs.  Yet these same private firms receive very little financing from the formal financial system, which remains focused on serving state enterprises.  The problem is particularly acute for SMEs.  The typical SME in China gets about 10% of its working capital financing from banks; in Korea or Thailand, the typical SME gets 40% of its financing from the banking system.  These issues of improving financial services will be the focus one of the sessions in our conference.   </li></ul>
  15. 15. Facing trade barriers <ul><li>Trade has been a crucial engine of growth in China, but Green barrier becomes biggest obstacle. </li></ul><ul><li>Example: food safety issue. </li></ul><ul><li>China SMEs also face anti-dumpling and other trade barriers. </li></ul>
  16. 16. IPR issue <ul><li>China SMEs do not have good brands. </li></ul><ul><li>Lack of IPR protection </li></ul><ul><li>Face IPR barrier </li></ul>
  17. 17. 2008, more difficulties for Chinese SMEs <ul><li>Recent trade and inflation data released how difficult an environment China-based exporters now operate in. </li></ul><ul><li>The consumer price index clocked a year-on-year rise of 8.7 per cent in February – a 12-year high exacerbated by shortages stemming from January's severe snowstorms. </li></ul><ul><li>The renminbi has appreciated 15 per cent against the dollar since mid-2005. </li></ul><ul><li>The prices of China's exports have been rising for almost five years. </li></ul><ul><li>China's underlying inflationary pressures make much more difficult for exporters to continue to absorb the brunt of domestic cost pressures. </li></ul><ul><li>China's January-February trade surplus provided a hint of what could lie ahead, falling 29 per cent year-on-year to $28bn. </li></ul>
  18. 18. Look into the future <ul><li>China’s regional policy </li></ul>
  19. 19. China’s regional policy: Why ASEAN? <ul><li>The volume of trade between China and ASEAN had amounted to US$ 160.8billion in 2006, growing 23.4% over the previous year </li></ul><ul><li>China and Laos trade grew 69% </li></ul><ul><li>China and the Philippines trade grew 33% </li></ul><ul><li>China and Thailand trade grew 27 </li></ul><ul><li>China and Vietnam trade grew 21% </li></ul><ul><li>China and Singapore trade grew 23%… </li></ul>
  20. 20. China’s regional policy: Why ASEAN? <ul><li>China attaches great importance to regional economic cooperation. In 2010, China will establish a free trade zone with ASEAN countries. China has also signed agreements to establish a free trade zone with Pakistan and Chile and the agreement is being implemented. At present, China is working to sign agreements to establish a free trade zone with such countries and regions as New Zealand, Australia, the Gulf Cooperation Council, Singapore, and Iceland. </li></ul>
  21. 21. China’s regional policy: Why ASEAN? <ul><li>China has 87.5 bln USD of trade deficit with E. Asian region, why does China still keep free trade policy with ASEAN countries? </li></ul>
  22. 22. China’s regional policy: Why ASEAN? <ul><li>Investment. </li></ul><ul><li>At present, China has entered into a fast round of expansion in its overseas investment activities. Over the past three years, China’s direct investment at overseas market has increased at an annual rate of 70% or more, making China now one of the biggest investors in the world. </li></ul><ul><li>Chance for SMEs </li></ul>

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