More Aid to Private Firms

The State has introduced policies of granting financial aid and other support to small and medium-sized private companies.

Faced with such a tough development environment, a special law guaranteeing these companies' healthy growth should be drafted, said an article in China Economic Times.

The State Economic and Trade Commission has issued guidelines on encouraging the development of small and medium-sized businesses.

The policy lays down simplified approval procedures for setting up such businesses, and says that governments at all levels should start investment funds to finance technology-oriented small firms.

Governments are required to offer capital to ease start-up costs and the technological upgrading necessary for companies, and provide a credit guarantee for them.

Because of such supportive policies, private businesses were treated the same as their State-owned counterparts, according to the article, which went on to say they had developed impressively, accounting for 99 per cent of all registered businesses. In fact, they created about 60 per cent of national industrial output and contributed 40 per cent of overall tax revenue, the article said, providing 75 per cent more job opportunities.

As well as the support the State had granted, firms were expected to develop better under the new circumstances, the article said.

The reforms, which have been put in place very smoothly in State-owned enterprises, would bring more opportunities for the private sector because they would squeeze out the smaller State-run firms, the article said.

China's pending entry into the World Trade Organization will push forward the opening up of the domestic industry. In other words, many private businesses will be allowed into industries that have so far been exclusively the domain of the State sector.

The new firms should take advantage of the opportunity to sharpen their competitive edge, the article said.

China's campaign to develop the country's less developed western regions offers private businesses an opportunity to expand their operations.

But despite such favourable opportunities, they were faced with tough challenges in the current e-commerce and economic globalization era, the article said.

The key role of the Internet lies in the fast information flow it has enabled, which is convenient and cost-saving for small companies.

Traditionally their operations have been bottlenecked by insufficient outside information, and now e-commerce could help them to solve the problem. What was worrying was that many small businesses simply went through the motions of establishing their e-commerce side, the article said.

They were not aiming at applying e-commerce to their daily operations, instead making a show under peer pressure that they had adopted e-commerce transactions.

The article urged those companies to enhance their awareness of e-commerce and make an appropriate e-commerce strategy, based on available resources and traditional advantages.

Economic globalization had presented a golden opportunity for small businesses to expand, the article said, operating at a lower cost than bigger conglomerates. Modern information techniques made it much easier for them to advertise their products, the report said, and if they had competitive products, they could make use of the modern information network to promote them in the global market.

The People's Bank of China, China's central bank, has issued guidelines on giving more financial support to small and medium-sized businesses.

The guidelines say the stipulated earning capacity of small firms should be lowered so that small outfits could borrow money in an effort to curtail their vulnerability to the wave of globalization.

A start-up fund for small businesses was introduced last June, which has so far pooled 260 million yuan (US$31.3 million), although the amount of money applied for has reached 4 billion yuan (US$482 million).

Although the State had promised to grant equal treatment and more financial aid to private companies, a special law needed to be drafted to ensure the effective implementation of the State's promise, the article said.

The State needs to make a more effective plan to develop small businesses, periodically issuing guidelines to instruct companies about what industries are suitable for them.

Fortunately, the State is listening and is in the process of drawing up new laws. So far, draft laws state that governments at all levels should create more financing opportunities for small and medium-sized private firms, and that procedures for gaining credit and mortgages should be simplified. (Source: chinadaily.com.cn)



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