Recently China has unveiled new guidelines to nurture the development of private enterprises. What's behind these guidelines and how can we better boost private enterprises, especially SMEs (small and medium-sized enterprises)?
Qu Qiang, assistant director of the International Monetary Institute at Renmin University of China, says the Chinese government realizes that the economy does need "restructuring" and the timing of the new guidelines is actually "quite right." We have to acknowledge the so-called "cycle" in our economy. Since the economy was booming for a while, you can anticipate there will be a down cycle. The economy is now in a down cycle, but it doesn't mean the government cannot do anything about it. To a large extent, the government can smooth the whole process to facilitate a quick rebound.
Qu added that there are both objective and subjective challenges for Chinese private enterprises. The objective challenge is that when the economy is in the down cycle, the way out is innovation – to find new business models, new products and new ways of making money. He also stressed that we can do more in our legal systems against bankruptcy and banking policies towards SMEs.
He also says China needs to restructure its financial sector for there is not enough venture capital and private equity for those who have a higher risk preference and those who really understand how to navigate through the risks to find potential SMEs.
Charles Liu, founder of Hao Capital, says the entrepreneurial side in China has a lot to learn in terms of what behavior is proper and the regulators have a lot to learn in how to boost positive behavior among entrepreneurs.
He adds that the global economic slowdown is impacting everybody and the structural side of the Chinese economy is shifting away from labor-intensive industries to technology-driven ones. Over the last three or four years, there's been a major push in environmental technologies from the government, which is quite positive.
Kuang Ziping, founding managing partner of Qiming Venture Partners, says the entrepreneurial spirit is alive and well in China, but when the overall economy is slowing down, especially when the funding environment becomes more challenging, small businesses naturally pull back a bit to make sure that they have enough money for rainy days. Some structural issues and policy tightening on nonbank finance are having quite an impact on many small businesses, he added.
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