China's latest move to support over 1,000innovative small and medium-sized companies is conducive to enhancing theresilience of the industrial chain and boosting the high-quality development ofthe nation's sprawling industrial economy, officials and analysts said.

The comments came after the Ministry ofFinance said on February 4th that the central government will allocate morethan 10 billion yuan ($1.55 billion) from 2021 to 2025 to support the growth ofmore than 1,000"little giants", or SMEs that focus on a market nicheand master key technologies with strong innovation capacity.

Such SMEs are similar to "hiddenchampions", a term coined by German author Hermann Simon to describesmall, highly specialized world-market leaders in Germany.

Innovativegrowth

Qu Xianming, an expert at the National ManufacturingStrategy Advisory Committee, a Beijing-based think tank, said innovative SMEsare a key link in the entire industrial chain and their role is irreplaceable.

Cultivating globally competitive"little giants" can help China better stabilize the supply chain andseek high-quality development in manufacturing, he said.

"China lags behind developed countriesin making certain high-end industrial components, and the efforts to nurtureSMEs that specialize in one or two products can help the country achievebreakthroughs in crucial areas and complement its industrial structure,"Qu said.

Shi Zhengwen, a professor of tax law andpolicy at the China University of Political Science and Law in Beijing, said,"The money can be used to attract provincial governments to increase theirfiscal support to innovative, specialized SMEs."

The latest fiscal support is part ofChina's broader push to cultivate a globally competitive ecosystem of SMEs,which account for nearly 50 percent of the nation's tax revenue, 60 percent ofChina's GDP, 70 percent of technological innovation and 80 percent of urbanemployment in China, according to the Ministry of Industry and InformationTechnology.

In August last year, President Xi Jinpingcalled for efforts to foster the innovative development of micro, small andmedium-sized technology companies during his inspection tour of Anhui province.

In response to the call, Xiao Yaqing,minister of industry and information technology, said earlier this year thatthe ministry plans to turn 10,000 SMEs into "little giants "over thenext three to five years to help them improve their innovation capabilities,boost corporate management and accelerate digital transformation.

Last year, China SME Development Fund CoLtd, a fund with registered capital of 35.75 billion yuan, was set up inShanghai to promote the sustainable growth of SMEs in key sectors. The Ministryof Finance acts as a limited partner to the fund with a 42.66 percent stake amountingto 15.25 billion yuan.

Amid the COVID-19 pandemic, the centralgovernment has rolled out a set of policies, including tax rebates, to helpSMEs resume work and solve financing difficulties.

Cao Yuteng, CEO of FlexBot, a self-drivingtechnology startup in Guiyang, Guizhou province, said he is very excited to seethe government's commitment to help SMEs.

"Despite short-term difficulties amidthe pandemic, we are working hard to use technologies to improve efficiency. Weare confident about future development," Cao said.

About 92 percent of 605 surveyed SMEs inChina said they are confident about their ability to innovate despite pressurefrom intensified competition, market uncertainties and challenges created byCOVID-19, according to a report jointly released in July by US tech heavyweightHP Inc and Peking University's Guanghua School of Management.

Newsystem to improve SME lending

China has established a unified nationalfinancing registration system that uses movable property and rights as pledges,which is expected to increase loans for small and medium-sized enterprises andimprove the overall business environment.

The unified system has been expanded acrossthe country since Jan 1, after pilot programs were conducted in four cities－Beijing,Shanghai, Chongqing and Guangzhou in Guangdong province－central bankofficials said at a news conference.

The People's Bank of China, the centralbank, was authorized by the State Council, China's Cabinet, to take fullresponsibility for the unified registration system. It started providingsupport and inquiry services on Jan 1, and the nationwide system is runningsmoothly, said Zhang Zihong, head of the PBOC's Credit Reference Center.

A statement from the PBOC said seven typesof pledges of movable property and rights will be subject to the unifiedregistration. These include production equipment, raw materials, semifinishedproducts and finished products, accounts receivable, deposit slips, warehousereceipts and bills of lading, and financial lease pledges.

Based on the type of pledge of movableproperty and rights, the market entities can apply for registration within asingle system.

It will increase the transparency of realrights for pledges, add to the certainty of realizing the rights of securedparties, reduce the risks and costs of credit transactions and supportfinancial institutions and other secured parties to provide pledge financing,experts said.

The State Council decided on Dec 22 tounify the nation's registration system for movable property and rights pledgesfrom Jan 1,2021. The Credit Reference Center of the PBOC was designated tocarry out the registration service accordingly.

Analysts said the decision was in line withrequirements under the Civil Code and will help improve the businessenvironment in the country.

Providing loans for micro, small andmedium-sized enterprises based on their credit information is a measure thatthe central bank promoted last year, which facilitated production resumptionsince the novel coronavirus outbreak, said Tian Di, deputy head of the PBOC'sCredit Information System Bureau.

By the end of 2020, 131 corporate creditinformation institutions received approvals from the central bank to provideregistration and inquiry services to market entities. The PBOC said that sevenkey market-oriented institutions helped about 2.35 million small and microcompanies receive 1.41 trillion yuan ($216.2 billion) of credit by the end oflast year, with a nonperforming loan ratio of 1.16 percent, a relatively lowlevel.

The measures are effective in helping smallbusinesses get financing and mitigate the shocks from the COVID-19 pandemic,said Tian.

Recoveryfor SMEs vital for 2021 growth

China's growth prospects for this year willhinge largely on the continuation of policies to boost consumption and thebetter recovery of small and medium-sized enterprises, experts said.

Chen Changsheng, director-general of thedepartment of macroeconomic research at the Development Research Center of theState Council, said in a recent interview that China could achieve its economicgrowth targets for last year due to the prompt actions taken to contain the COVID-19pandemic and its market-friendly policies.

The central government issued severalinnovative fiscal and monetary policies to help businesses and households sinceCOVID-19.

These include a special transfer mechanismdesigned to channel incremental fiscal funds straight to county-levelgovernments, and the extension of repayments for inclusive loans and creditsupport programs to help small businesses.

"These newly developed mechanisms haveeffectively energized the market players, particularly the small and privatefirms, and made businesses hum again," Chen said.

He said that despite the COVID-19 epidemic,there was no decline in the number of market participants while the number ofnew businesses kept growing. There are more than 100 million market entities inthe economy, with the majority being SMEs, accounting for over 80 percent ofthe total jobs in the country.

China's private business sector isburgeoning largely due to the country's consistent reform efforts, Chen said.

 Thecountry made enormous efforts to boost globalization and opening-up last year,including the signing of the Regional Comprehensive Economic Partnershipagreement among 15 participating countries, completing negotiations on theEU-China Comprehensive Agreement on Investment, releasing a master plan for theHainan Free Trade Port and shortening the negative list for foreign investment,and so on.

He said that China's resolute efforts andachievements in effectively containing COVID-19 have ensured a speedy economicrecovery, but also contributed substantially to ensuring the stability ofglobal supply chains.

The Central Economic Work Conference inDecember said China will strive to keep its economic fundamentals within aproper range, and pledged to maintain its policy support for the economy withno major policy shifts.