A worker in a private company engaging in 3D printing in Wen'an County of Hebei Province (LI XIAOGUO)

Li Peixue, Chairman of the Board of Directors of Shandong Sandi Shikong 3D Technology Co., Ltd., was quite satisfied with his company’s development in 2018. Its 3D intelligent manufacturing cloud service platform has become one of the biggest public 3D-printing service websites of the country. With nearly 2,000 3D printing companies, more than 120,000 app companies and over 3 million individual members registered on the platform, Li’s company covers more than 95 percent of 3D printing clients nationwide.

Established in March 2016, Sandi Shikong, a private company based in the coastal city of Qingdao, achieved this impressive success in 2018 alone. Li admitted that 2017 was a tough year for his company. “During this tough time, we even did not have money to pay our employees’ salary for five month,” said Li. “Fortunately, we got strong support from the government.” 

In late 2017, Li’s company was given 30 million yuan ($4.42 million) of industry assistance funds and 3 million yuan ($442,480) of awards for its research achievements and development in 2016 from the government. “With this financial support, we could continue our work and our business is booming,” said Li. 

In fact, Sandi Shikong is not the only private company enjoying government support. All the private companies that are aligned with China’s market demand, especially high-tech companies nationwide, are gaining support from the government.  

The Central Economic Work Conference held by the Central Committee of the Communist Party of China and the State Council on December 19-21, 2018, also indicated that more support for development of private companies was in the pipeline. 

China’s private sector is making a critical contribution to the development of the national economy, say experts. Statistics show that China’s private sector now accounts for more than 50 percent of the country’s tax revenue, over 60 percent of GDP, 70 percent of technological innovation, over 80 percent of employment and more than 90 percent of the number of companies. 

Building bridges 

But behind these figures, China’s private sector still faces a number of challenges. 

Among these challenges, financing remains the main concern for private companies. At a symposium on finance held in September 2018, Yi Gang, Governor of the People’s Bank of China - the Chinese central bank - stressed the need to “build bridges” between banks and private companies so as to establish effective long-term communication channels. 

In fact, in 2018, the China Banking and Insurance Regulatory Commission (CBIRC) took a series of measures to alleviate financing burdens for private companies, in areas including monetary policy and financial inclusion, said Wang Zhaoxing, CBIRC Vice Chairman, at a press conference on October 30, 2018. 

“The growth rate of loans given to small and micro enterprises shall not be lower than the average growth rate in the sector and the number of loan beneficiaries shall not be lower than the number for the same period in the previous year. At the same time, the CBIRC encourages banks to provide financial support to the best performing private companies to enable them to fully play their leading role,” said Wang.  

His remarks did not fall on deaf ears. Indeed, the banks soon followed suit. “Small and micro enterprises are all private companies. The difference is that small and micro businesses are more vulnerable to risks,” said Tian Guoli, Chairman of the Board of China Construction Bank (CCB). The CCB is now turning to new technologies - artificial intelligence, big data, among others - to solve some of the problems that hinder the development of small and micro businesses. 

In the past, little information was available about these companies, so banks find it difficult to assess the risks associated with providing loans. In 2018, the CCB developed an app specifically designed for small and micro businesses. Now, small business owners don’t even need to go to see their banker: the app is able to process their applications and calculate their potential loans in just a few minutes. In just one month, the number of users of the app exceeded 1 million. 

Yi Huiman, Chairman of the Board of Directors of the Industrial and Commercial Bank of China, announced that his bank had signed contracts with 100 major private companies in the manufacturing, food, telecommunications and textile sectors. “At this critical time, we want to ensure the confidence and development of private companies and help them overcome difficulties,” said Yi. 

Synergy first 

Reducing taxes on private companies is another essential measure. In November 2018, China’s State Taxation Administration organized a symposium on this issue. “It is necessary to consider developing a policy for a broader tax reduction as soon as possible. Private companies are an important source of taxation and it is now essential that taxation authorities cut their taxes to support their development,” said Wang Jun, Administer of State Taxation Administration. 

According to Wang, in 2018, tax cuts increased significantly. As of May 1, the implementation of a series of measures, including a significant cut of value-added tax, lowered the tax growth rate. In the first four months of 2018, tax revenues increased by 16.8 percent. This figure fell to 6.4 percent between May and October. 

“Preferential policies promulgated by the government must be implemented by local taxation authorities. At the same time, tax reduction procedures must be clearly explained so that taxpayers are in a better position to understand them,” said Wang Shuai, Administrative and Financial Director of Haoxiangni, one of China’s food manufacturers. 

Nurturing a healthy legal environment is also an essential step. On January 2, 2019, Yuhua County Court in Shijiazhuang City, north China’s Hebei Province, brought together about 30 private entrepreneurs to discuss measures aimed at preventing risks and increasing legal awareness. 

“When it comes to establishing the rule of law, the promise to protect private entrepreneurs’ personal and property safety has reassured the majority of entrepreneurs in the long term,” wrote Yao Kai, Professor at Fudan University. 

In addition, China is now one of the 50 easiest places to do business, due to a record number of reforms, said the World Bank in its annual Doing Business Report 2019, published in late 2018. China has moved from 78th to 46th place globally, making it the country having carried out the highest number of reforms in East Asia and the Pacific region. 

“China has made rapid progress in improving the business environment for Chinese small and medium-sized enterprises over the past year. These advances signal that the government attaches great importance to the development of entrepreneurship and private enterprises,” said Bert Hofman, World Bank Country Director for China.  

(Comments to glj@chinafrica.cn)