China SME Development Strategy Study.docx

Study of Chinese Private SME Development StrategyAbstract: Since the reform and opening up in China, the private SMEs (Small and Medium Enterprises) are developing rapidly and play an increasingly important role as a major force in promoting social development in China's economic development process. However, with the accelerated pace of economic globalization, increasingly fierce competition of the market and the wide infections of the current global economic crisis, private SMEs are faced a more serious situation in its developing history. In this context, how to correctly identify the strengths and weaknesses in the growth process and to rely on the favorable factors, while to avoid the negative factors, thus survive the financial crisis and continue its healthy and rapid development is the vital issues need to be addressed by private small and medium enterprises. Therefore, it is significant both theoretically and practically to study the influencing factors of private SMEs through empirical analysis of favorable and unfavorable factors of the growth process and putting forward the development strategy for SMEs. In this thesis, we take the Chinese private SMEs as the object of study, combined its developing environment and present situation, to analyze the private small and medium enterprises development strategy so as to arrive an effective development strategy for private SMEs.This thesis can be divided into five major sections. The first part is an introduction, which describes the object of study, research, research objectives, research significance, research methods and some theories. In the second part, we defined many aspects of the economic environment, policy environment, and development by combining previous information and data, with the relevant circumstances of small and medium enterprises. Part three is about the generalization of the problems. Summarize the problems encountered in the development of SMEs as well as a variety of factors in its development and a variety of factors that affect its development analysis by employing information and data collected. Part four is the comparison of the development of SMEs and large enterprises, and specifically analyzing the impact of the strategic positioning on the development of small and medium-sized enterprises. Part five is focused on the analysis on recommendations and strategies. Based on the above issues and influencing factors, we come up effective measures to support and promote the development of small and medium-sized enterprises and to improve the environment for SME development. Also, the policy recommendations are proposed to promote the development of small and medium-sized enterprises.Key words: Private SMEs, present status, strategic positioning, approachesIntroduction1.1 The significance and purpose of the topicsSince the reform and opening up in China, the private SMEs is developing rapidly and play an increasingly important role as an important force in promoting social development in China's economic development process. However, with the accelerated pace of economic globalization, increasingly fierce competition, and the wider infections of the current global economic crisis, private SMEs are faced a more serious situation. In this context, how to correctly identify the strengths and weaknesses in the growth process and to rely on the favorable factors, while to avoid the negative factors, thus to survive the financial crisis and to continue its healthy and rapid development is the vital issues needed to be addressed for private small and medium enterprises.Therefore, it is significant both theoretically and practically for the study of the influencing factors in private SMEs development history through empirical analysis of favorable and unfavorable factors of the growth process in order to put forward the development strategy for its rapid development.The purpose of this paper is to do some work in the following two aspects:(1) Proposing measures to support and promote the development of private SMEs.(2) Put forward policy recommendations to promote the development of private small and medium enterprises in order to improve the environment for the development of private small and medium enterprises.1.2 Subjects, Contents and Methods1.2.1 The object of studyIn this thesis, we take the Chinese private SMEs as the object of study, combined its developing environment and present situation, to analyze the private small and medium enterprises development strategy so as to arrive an effective development strategy for private SMEs1.2.2 The research methodThis study can be divided into five major sections. The first part is an introduction, which describes the object of study, research, research objectives, research significance, research methods and some theories. In the second part, we defined many aspects of the economic environment, policy environment, and development by combining previous information and data, with the relevant circumstances of small and medium enterprises. Part three is about the generalization of the problems. Summarize the problems encountered in the development of SMEs as well as a variety of factors in its development and a variety of factors that affect its development analysis by employing information and data collected. Part four is the comparison of the development of SMEs and large enterprises, and specifically analyzing the impact of the strategic positioning on the development of small and medium-sized enterprises. Part five is focused on the analysis on recommendations and strategies. Based on the above issues and influencing factors, we come up effective measures to support and promote the development of small and medium-sized enterprises and to improve the environment for SME development. Also, the policy recommendations are proposed to promote the development of small and medium-sized enterprises.1.2.3 Research MethodsIn this thesis, we find new ideas, draw general conclusions and identify problems by reading relevant classified literature. Also, we employ statistics application method to collect and classify the data through various means, and then applied to the study. Third, the overall analysis, analysis of private small and medium enterprises development strategy, adhere to the theoretical analysis are the overall analysis of the SME development strategy, draw a favorable conclusion on the development of private SMEs.Analysis of the present status of private SMEs2.1 The definition of SMEOn June 18th, 2011, the four departments: the Ministry of Industry and Information Technology, National Bureau of Statistics, National Development and Reform Commission and the Ministry of Finance agreed by the State Council jointly issued the "SME program standard regulation" According to the regulations, our SME criteria for the classification as follows: in agriculture, forestry, animal husbandry and fisheries industries, enterprises whose operating income of 200 million Yuan or below can be defined as small and medium-sized enterprises. Industrial (including mining, manufacturing, electricity, heat, gas and water production and supply industry), employing 1,000 people or less or operating income of 400 million Yuan or below can be defined as small and medium-sized enterprises. Construction industry whose operating income is 800 million Yuan or less or its total assets is 800 million Yuan or less can be defined as small and medium-sized enterprises. Wholesale trade industry that employ 200 people or less or possess operating income of 400 million Yuan or less can be defined as small and medium-sized enterprises. Retail trade industry that employ 300 people or less or the operating income of 200 million Yuan or less can be defined as small and medium-sized enterprises. Transport and postal industry that employ 1,000 people or less or operating income of 300 million Yuan or less can be defined as small and medium-sized enterprises. Warehousing industry that employ 200 people or less below or the operating income of 300 million Yuan can be defined as small and medium-sized enterprises. The lodging industry, catering industry and the software and IT services industry that employ 300 people or less below or the operating income of 100 million Yuan for small and medium-sized enterprises. Transmission of information industry that employ 2,000 people or less or the business income is 1 billion Yuan or less can be defined as small and medium-sized enterprises. Real estate development and management industry whose operating income is 2 billion Yuan or 100 million Yuan total assets can be defined as small and medium-sized enterprises. Property management industry that employ 1,000 people or less below or the operating income of 50 million Yuan can be defined as small and medium-sized enterprises. Leasing and business services industries that employ 300 people or less or possess total assets of 1.2 billion Yuan can be defined as small and medium-sized enterprises.2.2 The importance of a development of SMEs20 years since reform and opening up, the SMEs developed vigorously. SMEs possess a very important position and role in the economic and social development; they are an important growth point of national economic development. In the past few years, SMEs accounted for 60% of the export trade of about $ 150 billion a year. The development of SMEs plays an important role in stimulating the development of national economy so that ensure the achievement of economic growth target. According to statistics, in the "Eighth Five-Year Plan" period, industrial enterprises in China's GDP growth rate is 18%, of which large-scale enterprises growth rate is 5-8%, while the same period in SME growth rate is over 30%. SMEs have become an important pillar of national economic development.Healthy development of SMEs can effectively alleviate the current pressure on employment, to meet the needs of the labor force needs. Two decades after the reform and opening up, China's non-farm industry has created 248 million jobs, and this great achievement depends primarily on small and medium-sized enterprises. At present, the number of industrial employment is about 150 million, including small and medium enterprises in employment for 110 million, accounting for 73%; township enterprises, mainly small and medium enterprises, absorbed the 130 million rural surplus labor. China is in a period of adjustment of industrial structure, so the labor transfers from rural to non-agricultural and resource industries, the textile industry, which increase the pressure on employment. The face of such pressure on employment, there is no doubt that development of SMEs is strongly required.To realize the last two steps in the three-step strategy of China's economic development, it is essential to the development of SMEs. Since China's industrialization process is in its infant stage, and the market economy has just started, the development of SMEs has theoretical and practical significance for us to explore the law of the socialist market economy. Practically speaking, China's county-level economy rely majorly on SMEs, so the development of SMEs solve the grass-roots financial accumulation of capital, and revitalize of the economic development.2.3 SMEs Economic EnvironmentFinancing environment of SMEs plays a decisive role in SMEs financing capacity and also is an important factor affecting SME financing situation. SME financing environment can be analysis from the internal micro environment and corporate external macro environment.2.3.1 SMEs internal micro environment(1) Operational risks SMEs mainly rely on sole-proprietorship and partnership enterprises, with a simple governance structure, and their ownership and management rights are generally concentrated in the hands of business owners who in the management process, generally lack long-term strategy for enterprise development, production and operations with a certain degree of uncertainty. (2) Demand for funds Due to SMEs small scales, the demand for capital at one time is very small, but happed in high frequency of occurrence, strong effectiveness and mainly short-term liquidity loans, resulting in higher transaction costs of SME lending units. According to statistics, the frequency of the loans of SMEs is five times as that of medium-sized enterprises, the average loan amount is only 5 of the large and medium-sized enterprises and the loan management costs is five times as large and medium-sized enterprises. (3) Private funds The owners or investors of SMEs are not too many, generally one to 10, which greatly limited the size of the equity of capital financing. Further, due to the SMEs poor awareness of self-accumulation, there will be over-allocation in the short term in practice, resulting in the deficiency of own funds and total assets, also the low standard of the total fixed assets ratio and the mortgaged property can be used is less.(4) Transparency of information SMEs are usually in smaller scale with a shorter set-up time and frequently changes of personnel. The financial system and financial management of these enterprises are not standardized and sound, coupled with the lack of a monitor by external audit department, leading to information opaque of small and medium enterprises. At the same time, many small and medium enterprises in order to evade tax, issued false financial statements. Some SMEs in order to get bank loans, financially fraud to cover up the financial loss, which makes the banks may not accurately identify the corporate real financial position that directly impact banks lending activity.2.3.2 Corporate external macro environment(1) Government financing support systemGovernments policies play a vital role in support SMEs development. At the present, the department of industry information sets up an China Business Cooperation and Coordination Center, in order to provide services for SMEs in China and in accordance with the development of small and medium-sized enterprises needs to carry out the business diagnostic consultation and SME development research.The establishment of financing guarantee services under the government guidance is a key step to solve the financing problem in the process of national growth of SMEs. Such as the U.S. Small Business Administration (SBA) aims to provide credit to SMEs credit guarantee. The Japanese government has set up a public library of the credit guarantee associations and credit insurance for SMEs and financial institutions to provide loans to eligible small and medium enterprises. As of the end of 2008, according to the statistics of the Ministry of Information Industry, the SME credit guarantee institutions in China has reached 4247, 2334 billion in guarantee funds, in which the loans to SMEs cumulative guarantee volume reac