Experts: Small companies 'bedrock of real economy'

By Bao Chang (China Daily)
Updated: 2012-06-12

Finance technology hall at the forum. Wang Jing / China Daily

Financial support for small tech companies is central to helping China's real economy expand, experts at the sixth China International Private Equity Forum said yesterday.

"A first priority is to develop the real economy, which is crucial and the bedrock for medium, small and micro-sized companies," said Long Yongtu, a member of International Advisory Committee of the Boao Forum for Asia and a former vice-minister of foreign trade and economic cooperation.

"Ninety percent of their business is related to the real economy," he said, referring to producing goods and services rather than growth based on capital markets.

The CIPEF, which opened in Tianjin on June 10, is an annual forum which helps link businesses, investors, financial institutions and private-equity firms.

Huang Mengfu, chairman of the All-China Federation of Industry and Commerce, said that the financial system must put the real economy at the core of development and gear itself to SMEs, especially those related to science and technology.

Yet profits from financial instruments and speculation have expanded rapidly over the past few decades, surpassing the real economy around the world.

"However, we should have common understanding that finance support for the real economy is the base of the whole economy," Huang said.

Huang said a consensus should be formed so the financial system supports the real economy and a further cut in interest rates should be considered.

"Development of the real economy is a top priority, especially technology firms that are the backbone of economic transformation," Huang said.

Ma Weihua, president of China Merchants Bank, said that technology and finance are interdependent, especially in the IT sector, which has fundamentally changed the banking industry across the world.

"As a result, the banks enjoy higher economic benefits and a different operation model, which promises a wider reach and a higher efficiency," Ma said.

"I believe innovative technology by small and micro enterprises holds the most potential for the integration of technology and finance,' he added.

"Statistics also suggest that innovation per capita in those enterprises is double the number in big enterprises, so we cannot afford to neglect them," Ma said.

Innovation-driven small and micro businesses pour massive resources into R&D. Even in developed economies, the proportion of R&D in small and micro businesses is well beyond that by industrial giants.

Statistics show that 20 percent of employees in small science and technology enterprises are engaged in R&D on average, while at large enterprises the figure is only 3 percent.

Small firms also put innovation into commercial application 30 percent faster than big companies, according to industry studies.

(China Daily 06/11/2012 page24)