The Initiatives and Incentives for SMEs Technology Innovation in China. by Huang Xue, P. R. China June 27,2006
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1 The Initiatives and Incentives for SMEs Technology Innovation in China by Huang Xue, P. R. China June 27,2006
2 I m very glad to attend this forum of 2006 Expert Forum on APEC SME Innovation Policy. As one of developing economies, China is willing to cooperate with other economies to promote common development of economy Today, I would like to share four views on how to enhance SMEs' capability of independent innovation and promote the development of SMEs in China. The first one is the technology innovation situations of SMEs in China. The second is about promoting rapid development of SMEs in industry clusters. The third is to understand profoundly the importance and urgency of promoting SMEs independent innovation capabilities. The last one is, the Chinese Government innovation promoting policy for SMEs to enhance independent innovation capability.
3 1. The technology innovation situations of SMEs in China. SMEs have the following characteristics: Firstly, they can response quickly to markets. (SMEs can make a rapid innovation decision according to the change and request of markets properly) since their smaller scale and the shorter administration links. Secondly,( they have strong momentum for their development.) SMEs pay more attention to market and innovation than large ones for facing more existence crisis and more competitive pressure. Thirdly, they have flexible mechanism in management and human resource, (which make the innovation activities succeed more easily.)
4 However, SMEs in China still have some problems to solve at present: One problem is short of technology innovation talents In China, a small proportion of technology researchers serve in SMEs and most of them serve in big enterprises. Secondly, lack of innovation funds is another serious problem. SMEs capital socialization level is low and the total assets are small, which makes it difficult for them to cope with the risk of high costs of technology innovation and long payoff period.
5 Thirdly, SMEs input to technology innovation is insufficient. In 2004, the growth SMEs only invested 0.41 per cent of their sales income to R&D in China, which is not only quite lower than that of developed countries but also lower than the average of Chinese industrial enterprises. Fourthly, the ability of service innovation is weak. The services provided by Chinese existing technical intermediaries are incomplete (and lack profundity, and the service products are absent. ) The fifth is lack of efficient information channels. (Few channels to get information and untimely information also directly influence the innovation development of Chinese SMEs.)
6 2. Promoting rapid development of SMEs in industry clusters The inborn shortage of SMEs are small scale, infirm market influence, few financing channels, shortage of talents, lack of information resources etc. Considering the characteristics of SMEs in China, Chinese government promotes the rapid development of industry clusters. (In the clusters, SMEs have large scale, strong market influence, sufficient talents and sharable information, which avoid efficiently the deficiencies of SMEs. ) At the same time, Chinese government constitutes corresponding supporting policies according to the characteristics of industry clusters.
7 a) Enterprises aggregation Through specially foster local excellent enterprises( as seeds to collect gradually the same, approximate or related enterprises) within some specific area, SMEs clusters, which have similar products, are formed. For instance, CangNan in Zhejiang province is the largest aluminum badge basis in China, SMEs in this cluster cooperate and divide the work among them in their production and management according to the principle of efficiency and economy. (The enterprises are separated manufacturers connected by market within the cluster, and play a big-sized enterprise outside.)
8 b) Talents collection For example, the local government of Shishi city, Fujian province employs famous experts, consultants, and technical specialists to resolve technology difficult problems in SMEs, help clusters establish public service platform of dress CAD system for dress. The platform has a series of services ( including consulting, training, clothes styles designing, typesetting, tailoring, arranging, and technical agency etc. With the help of the platform, the original innovation ability and competitiveness of SMEs have been strengthened. Professionals, required by the development of industry clusters, can be obtained by recruiting, training etc. )
9 c) Funds collection Insufficient funds( are necessary for fostering and developing industry clusters, but it s difficult for most SMEs to finance. This problem) can be resolved by enlarging the direct financing such as private capital, private loan, foreign capital, and corporate bonds and by the complete finance services provided by banks. (The finance services meet the principles of joint assurance, deposit on schedule, installment loan, cycling use, which can not only hedge risks but also promote the development of SMEs. )
10 d) Technologies concentration The products from the clusters in Zhejiang province and Guangdong province have low price, strong competitiveness, and high market share because( in these clusters) the production technology is more advanced in same industry, and the costs are lower than average in China the key factors are advanced technology application and innovation. Policies formulated by Chinese government have stimulated the development of the productivity promotion centers in provinces and cities, the science and technology garden of university, incubators of science and technology, (which provide technical information and training, promote the research and development of new products for SMEs.)
11 e)markets collection Markets collection can be achieved through establishing big or middle special markets in some special exchange distributing centers, (and production is driven by markets which include manufactured markets and semi-manufactured manufactured products markets.) For example, Yiwu city, Zhejiang province, is famous for its small goods in China, has 52 different type markets, and the type of goods is over 100,000, and 40 per cent of goods are locally produced or manufactured. In the cluster of cardigan, which has been a certain scale, there are more than 3,500 SMEs in Wujiang town, and more than 50,000 related employees. In addition, there are more than 150 special shops in different areas of China. (After several years development, the mechanism of rapid service has been formed in every production procedure.)
12 With the development of industrial clusters mode, high economical products, industrial chains, ecological enterprises, dispersive industrial clusters, management globalization, have become the most favorable factors for the development of SMEs in China.
13 3. Understanding the importance and urgency of improving SMEs' independent innovation capabilities Though Chinese SMEs have made great progress in recent more than 20 years since the reform & opening-up, they are still( the main body of traditional industry in China, and they are) in low technology level and the corresponding products with low-added value. After China s entry into WTO, (the pace of market-operation, informatization and internationalization has been quickened, which make it possible to globalize resources distribution, specialization of industry division, and promote science & technology innovation. ) The development of the high-tech industry accelerates the industry restructuring, meanwhile, it challenges the traditional SMEs. So, promoting SMEs innovation capabilities is urgent requirement for realizing the industry restructuring.
14 Improving SMEs independent innovation capabilities, and promoting to develop the modes of economy growth. SMEs are always with these serious phenomena: low-level and blind investing, repetitive constructing, source wasting, environment pollution, unsafe producing etc. It s the ultimate requirement for SMEs subsistence and development to improve SMEs independent innovation capabilities, advance SMEs' technology progress, resolve the prominent problems in the economy development by means of science & technology, and achieve the transformation of economy growth from source-driven to innovation-driven.
15 Improving SMEs' independent innovation capabilities, and promoting to enhance the quality of economy growth. In the past 20 years, Chinese economy grew at an average annual rate of 9.5 per cent. But through further analysis, we can find out that the quality of economy growth is low, core technologies with own intellectual property are lacking, the selfsupporting rate of key technology is low, and technology innovation has not become the main drive force of Chinese economy.
16 4. Incentive policies for SMEs to enhance the independent innovation capabilities in China. During the period of the Eleventh Five-year Plan, National Development and Reform Committee will actively implement SMEs' Growth Program. The general idea: (Carry out the spirit of the fifth session of the 16th National People s Congress,) persevere in scientific conception of development, and fulfill the national Promotion Laws for SMEs.
17 The main goals: To perfect the innovation supporting system for SMEs based on carrying out and completing the innovation policies, to establish an innovation environment, to establish a common technologies service platform for 100 SMEs, to foster a batch of SMEs with their own intellectual properties, know-hows and strong competitiveness, and to establish 1,000 pilot SMEs with the information network.
18 The main task: 1)Boost the innovation idea and establish the promotion mechanism for SMEs independent innovation. 2)Establish and perfect innovation supporting service system and improve the capabilities of SMEs independent innovation. 3)Perfect the innovation policy and optimize the innovation environment for SMEs 4)Carry out the Information Project and promote the development of SMEs innovation
19 Ladies and gentlemen, Dear friends, In the economic globalization process, all economies are interpenetrating and interdependent. (Under the circumstances of which the amalgamation of world economy is speeding up and technology is developing rapidly,) so technology innovation and sustainable development is the common subject we have to face. Finally, I put forward three suggestions on promoting SME innovation:
20 1) Strengthening the communication and cooperation of member economies between industries, and educational and research institutions in order to train talents on technology, management and research for member economies. 2) Enlarging effective financing channel in member economies so that innovative SME can obtain more innovative capital. 3) Establishing innovative markets for member economies to guarantee marketing activities can be performed fairly and effectively, and boost the integral prosperity of member economies.
21 Thank you!
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