Business / Economy

Local govts pave way for new wave of small firms

By Xu Jingxi in Dongguan and Foshan, Guangdong (China Daily) Updated: 2015-02-28 10:21

As a manufacturing base in the Pearl River Delta, Dongguan has an edge in developing e-commerce, based on its vast supply of products and well-developed logistics industry.

"Dongguan has well-made products, but it doesn't have established strong brands of its own. E-commerce can help original equipment manufacturers in the city to transform and upgrade by selling their originally designed products online to gradually build their own brands," said Lin Jianqiang, managing director of Dongguan Thunion. "Online marketing costs much less than traditional marketing through physical stores."

Lin said that his company is popular among young people, especially college students. In the first six months of its existence, Dongguan Thunion helped 258 startups get business licenses, and about 20 of those were founded by college students.

The company offers registration and bookkeeping services for student-run companies for free, while charging other clients 1,000 yuan ($160) for these services.

"Students are able to focus on marketing, which is the core of e-commerce and where they can make good use of their creativity," Lin said.

Addressing the World Economic Forum Annual Meeting 2015 in Davos, Switzerland, on Jan 21, Premier Li Keqiang said that to foster a new engine of growth, China will encourage mass entrepreneurship and innovation, which is "a gold mine that provides a constant source of creativity and wealth".

"Excessive regulation discourages innovation, and healthy competition is the way to prosperity. We will deepen reform of the administrative system," Li said.

As one way to support small companies, they are being offered tax breaks. Businesses with annual taxable incomes below 200,000 yuan will now be eligible for a 50 percent income tax cut, according to a statement released after the State Council's executive meeting on Wednesday, which was presided over by Li.

The measure is retroactive to Jan 1 this year and runs through the end of 2017. This week's announcement was the latest reduction in small business taxes. The central government has expanded eligibility for the 50 percent reduction several times since 2012.

The original threshold was a business income below 30,000 yuan.

Guo Huazhong, general manager of a hi-tech equipment designer and manufacturer based in Foshan, said he is encouraged by the local government's support of small and medium-sized enterprises in terms of funding and talent recruitment.

Guangdong Ruizhou Technology Co Ltd, founded by Guo in 2004, sells originally designed numerical-control cutting machines that handle flexible materials to manufacturers of shoes, clothes and automotive interiors to help them upgrade their production lines.

Guo moved his company into the Hantian Science Park in Nanhai district, Foshan, in 2009. He used his patents as collateral for a loan of 3.5 million yuan, with the local government as the guarantor, to meet the capital threshold to enter the park.

"It was incredible that intellectual property, a piece of paper, can be turned into money. It was a big reform and the government has been vigorously promoting loans based on the value of intellectual property," Guo said.

Guo's company has about 120 employees, mostly recent college graduates. However, he said that SMEs cannot compete with big companies in recruiting staff and need more government help.

The government of Nanhai district has offered a creative solution, according to Guo. It collects technical problems from SMEs and invites students from the country's top universities such as Peking University and Tsinghua University to solve these problems during school vacations.

"It kills two birds with one stone. We can solve our practical problems more easily with students' access to their schools' data. At the same time, we can find the right talent for our company."

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