Smaller firms to benefit from new definition of SMEs

By Zhong Nan and Zhang Jin (China Daily)
Updated: 2010-10-27 09:31
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BEIJING - China is revising the definition of small and medium-sized enterprises (SMEs) to give smaller companies wider access to policy and financial support worth tens of billions of yuan.

Wang Lijian, spokesman for the Ministry of Industry and Information Technology, told China Daily that the ministry is working on the revision, but did not elaborate.

But Song Xinli, deputy secretary-general of China International Cooperation Association of Small and Medium Enterprises, said the ministry has already come up with a draft and is gathering opinions from various departments and ministries before submitting them to the State Council for approval.

Song, who is familiar with the revision, told China Daily that the draft proposed narrowing the scope of medium-sized companies and expanding that of small-sized companies. It also proposed the creation of another category - micro-sized companies.

"The move aims to give more support to smaller companies which have limited access to capital," Song said.

"Small and micro firms are expected to benefit most from the revision."

This year, the central government will spend 12 billion yuan ($1.8 billion) to support SMEs, Wang Liming, an official at the Ministry of Industry and Information Technology, said last month.

Under the current standards set seven years ago, companies are regarded as medium-sized enterprises if they employ 300 to 2,000 people, have annual sales of 30 to 300 million yuan and own assets worth 40 to 400 million yuan.

Companies that employ fewer than 300 people, earn less than 30 million yuan in annual sales and have assets of less than 40 million yuan are classified as small-sized.

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According to this definition, 99 percent of the country's 10.3 million companies are SMEs, which account for more than 80 percent of urban employment and produce 60 percent of China's GDP, Xinhua News Agency reported last month.

Chen Naixing, director of the Research Center for Small and Medium-sized Enterprises at the Chinese Academy of Social Sciences, said the revision provides a benchmark based on which policymakers can favor smaller ones.

"This will prevent some companies, which are large and well-capitalized but still categorized as medium-sized firms, from grabbing resources from smaller ones," Chen said. Funding has been a long-standing problem for SMEs.

"The biggest problem for SMEs in China is their methods of financing. They do not have proper access to financing which stunts their potential contribution to China's economic growth," said Oliver Barron, a financial analyst from China Economic Policy (London) Research Center.

It is unknown whether the revision will affect the listing threshold of the SME board and ChiNext - tailored for SMEs. The two boards set their criteria mainly on the basis of companies' profitability and capital base.

The Shenzhen Stock Exchange, which operates the two boards, was not immediately available for comment by press time. A spokesman for the China Securities Regulatory Commission refused to comment.

Wang Xing, Lu Chang and Li Xiang contributed to this story.