National Development and Reform Commission

June 7, 2007

Small and medium enterprises (SMEs) are an important role in achieving the economic miracles by some countries and regions. They are playing an increasingly essential role in economic prosperity, employment increase, innovation promotion and new industries creation, and have become an important driving force behind economic and social development. The development of SMEs is receiving more and more attention from the whole international community.

• Basic situation of the development of Chinese SMEs

Since reform and opening-up, Chinese SMEs have grown rapidly into an important driving force behind economic and social development as well as the building of a harmonious socialist society. At present, the Chinese SMEs is increasing rapidly in number, improving continuously in quality and becoming a lot more active. The development of SMEs has entered a new stage, which is mainly manifested in the following aspects.

First, SMEs play an key role in boosting economic growth. At present, China has 42 million SMEs, accounting for more than 99 percent of all enterprises in the country. In the period of the 10th Five-Year Plan, the national economy grew by 9.5 percent per year, while the added value of small and medium industrial enterprises statistical threshold grew by about 28 percent per year. At present, the value of the end products and services created by SMEs accounts for about 60 percent of gross domestic product, and the taxes paid by SMEs account for around 50 percent of total taxes collected by the state.

Second, SMEs are the main channel for expanding employment. SMEs provide more than 75 percent of urban employment positions. More than 80 percent of the laid-off and unemployed persons from state-owned enterprises have been re-employed in SMEs. A very large proportion of migrant workers from rural areas are working for SMEs. SMEs have begun to become an important channel for the employment of graduates from colleges and universities.

Third, SMEs have become a leader in technological innovation. At present, 65 percent of innovation patents and more than 80 percent of new products are developed by SMEs, which are very active in the technological innovation of both high-and-new-technology sectors such as electronics, information technology, bio-pharmaceuticals and new materials as well as new service industries such as information consultation, creative design and modern logistics.

Fourth, SMEs are an important driving force behind the adjustment and optimization of economic structure. Many SMEs have expanded from manufacturing, construction, transportation and trade sectors into infrastructure, public utility, new service and high-tech industries, and have completed the upgrade of industrial structure. SMEs have taken steps to achieve the goal of “professionalism, excellence, distinctiveness and originality”. The industrial clusters characterized by SME clusters are developing rapidly, optimizing the industrial and organizational structures.

Fifth, SMEs serve as a fresh force in further opening-up. With the rapid development of import and export trade in recent years, a number of competitive SMEs are actively “going global” to expand the global market. Statistics show SMEs have produced more than 90 percent of exported labor-intensive products such as clothes, textile products, toys, leather shoes, etc. while increasing their share of exported high-tech products such as telecommunication equipment, electronic products, biotechnology, new material, and etc.

However, SMEs are facing some difficulties and problems in the course of development. The main ones are as follows: In light of the external environment, laws and regulations are not sound and the policy system is not perfect; enterprises have difficulties in obtaining financing, loans and guarantees; the social service system is not sound and the public service system is still in the initial stage. Enterprises have prominent problems such as low level of overall quality, the extensive mode of growth and the irrational structure. The Chinese government attaches great importance to the development of SMEs.

The Central Committee of the Communist Party of China and the State Council have attached great importance to this issue. On January 1, 2003, the Law on the Promotion of Small and Medium-sized Enterprises became effective. The 16th Congress of the CPC made it clear that we should unswervingly consolidate and develop the public ownership economy and unswervingly encourage, support and guide the development of the non-public ownership economy. In February 2005, the State Council issued Several Opinions of the State Council on Encouraging, Supporting and Guiding the Development of Self-employed and Private Economy and Other Non-Public Sectors of the Economy. Provinces and cities promulgated a total of more than 200 supporting measures. It was stated in the Outline of the “11th Five-Year Plan”, the SME Growth Project will be carried out. Meanwhile, the State Council approved and established the National Leading Group for Promoting Development of Small and Medium Enterprises headed by the National Development and Reform Commission (NDRC) and constituted 14 ministries including the Ministry of Finance, the Ministry of Science and Technology and the Ministry of Agriculture. The Leading Group was established to strengthen the overall coordination, organization and guiding of SMEs. The external environment for the development of SMEs has been improving, the social service system for SMEs has been strengthened, and financing service of SMEs has been improving. Relevant departments of the State Council and the departments in charge of SMEs in local governments have done enormous work to accelerate the optimization and upgrade of industrial structure, strengthen employment and entrepreneurship mentoring, enhance management and training, and promote technological innovation, international market expansion and information system.

The “11th Five-Year Plan” period is critical for building an overall well-off society and is to offer important opportunities for the development of SMEs. We will promote the implementation of the SMEs Growth Project during the “11th Five-Year Plan” period, to form the SME groups with Chinese characteristics at the end of the “11th Five-Year Plan”, when the development environment will be improved significantly, the overall distribution be relatively reasonable, the level of management and technology be visibly elevated, the independent innovation and market competitiveness continue to improve, the capacity of creating jobs be constantly reinforced, the product quality and services level be excessively enhanced, resource conservation and environmental protection be effectively improved.

• Information about the ASEM SMEs Ministerial Meeting

SMEs play an active role in the economic development and employment expansion of all countries in the world, enhancing the cooperation and exchanges among ASEM SEMs was highlighted at the ASEM Summit and received universal recognition from the Asian and European members. At the fifth ASEM Summit in 2004, Premier Wen proposed "strengthening SME cooperation, creating business opportunities, and promoting two-way trade and investment flows between Asia and Europe ". Last September, Premier Wen Jiabao, at the sixth ASEM Summit held in Helsinki, Finland, made it clearer that "China proposes hosting 'ASEM SMEs Ministerial Meeting and Trade and Investment Fair" in 2007.

Currently, ASEM has 45 members in total, including 16 Asian member states, 27 EU member countries and the European Commission as well as the ASEAN Secretariat. Statistics shows that the countries within the ASEM mechanism account for 60 percent of global trade, 50 percent of the world economic output and 60 percent of the global population, of which SMEs contribute a large proportion, playing a positive role in the economic and social development of the members. It was made clear at the fifth and sixth ASEM Summit that SMEs have their increasing importance in the economy of ASEM members, and all members should strengthen inter-governmental cooperation to provide assistance for the international exchange of SMEs. Holding this SMEs Ministerial Meeting, we are to implement the guiding principles of the Summits, and to discuss and exchange the policy measures and practical experiences as well as strengthen pragmatic cooperation of ASEM members in the sector of SMEs.

This is the first SMEs Ministerial Meeting proposed and hosted by China within the ASEM framework. We hope that the success of this Meeting may help shape a regular mechanism for ASEM SME Ministerial Meeting. At the same time, we plan to submit the outcomes of the Meeting to the seventh ASEM Summit to be held in China next year, so as to further attract attentions to SMEs from the Summit .

Currently the preparation progress of ASEM SMEs Ministerial Meeting is well under way. Firstly, the Organizing Committee of the ASEM SEMs Ministerial Meeting has been formed, headed by NDRC and composed of Ministry of Foreign Affairs, Ministry of Commerce and other relevant Ministries. Mr. Ma Kai, Chairman of the NDRC, is Chairman of the Organizing Committee; Madam Ou Xinqian, along with Vice Ministers from relevant Ministries act as Vice Chairmen of the committee responsible for the preparation for the Meeting. Secondly, the themes and sub-themes for the Meeting were determined. The theme of the meeting is "Drive the Future with Innovation, Promote Development through Cooperation", with three sub-themes as Improve SMEs' capacity of independent innovation, Create sound service policy and supporting environment for SMEs and Cooperation among and development of SME industrial clusters. Thirdly, a website for the Meeting was built up, which enables the members to learn about preparations for the Meeting, and ensure smooth communication.

The ASEM SMEs Ministerial Meeting proposed and hosted by China will further promote the consultative dialogue among the members' governmental sectors, discuss topics of common concern relevant with improving the social service system, enhancing independent innovation capacity and strengthening regional cooperation in industrial clusters, bringing the cooperation and exchanges of ASEM SMEs to a new level and contributing to the development of the world economy.

(China Development Gateway June 7, 2007)