promoting sme innovation-china

8/14/2019 Promoting SME Innovation-China

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CHINA TORC

Policy System on Promoting SMEInnovation & Entrepreneurship in

China

Dr. LIANG Gui , Director GenTorch High Technology Industry Development Cen

Ministry of Science and Technology, C


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CHINA TORC

Torch Center: Nature, History &Position

Nature A public entity as a director subsidiary under MOST

History 1988: Established to implement Torch Program (www.ctp.gov.cn )

1999: In-house Innofund Administration Center set up (www.innofund.gov.cn )

2006: Integration with China Technology Market Administration Cenwww.sinotechmart.org )

Current Position

The sole agency commissioned by MOST to improve the overallenvironment for innovation and high-tech industry development
http://www.ctp.gov.cn/http://www.innofund.gov.cn/http://www.sinotechmart.org/http://www.sinotechmart.org/http://www.innofund.gov.cn/http://www.ctp.gov.cn/


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CHINA TORCOutlines

An Overview on SMEs in China Public Measures to Promote Innovation &

Entrepreneurship

Challenges still Facing

Future Strategy


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CHINA TORC

SMEs in China:Contributions to Economy and

Innovation A rapid growth since 1978

99.6% of all companies registered Already an essential part of the national economy

58.5 % of GDP 68% of import and export volume 48.2 % of tax revenue 75% of urban employment

Technology-based SMEs 140,000 by end of 2004

92% are private only 3% of all SMEs, but having created:

66% patents 75% technology innovations 82% new products


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CHINA TORC

SMEs in China:Difficulties and Constrain

Innovation and Development Restricted as a Result of Capital Scarcity

Limited own capital

Restricted external financing

Bank loan difficult due to scale and lack of guaranties

Only 10% can obtain bank credits Commercial capitals risk-evasive (not for innovation)

Fund raising from capital market more difficult

Government funding mainly to research institutes as a leg

the planned economy


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CHINA TORC

Public Measuresto Promote Innovation &

Entrepreneurship Technology Business Incubators

Improvement in Overall Environment

Innovation Fund for Tech-based SMEs

Roadmap Scheme


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CHINA TORC

TBIs :Earlier Efforts to Promote Entrepreneurship

and Innovation

A major content of China Torch Program (www.ctp.gov.cn)

Missions: Nurturing of technopreneurs and technology-basestartups

Statistics (2005):

Total number: 510, (general and sector-specific) Incubating area: 15 million m2

Tenant companies: 33,048

Accumulated graduates: 11,671
http://www.ctp.gov.cn/http://www.ctp.gov.cn/


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CHINA TORCTBIs: Recent Development

Diversified forms 58 university science parks

45 innovation park for overseas returned scholars

Sector Specific Incubation

Biomedicine Incubator, Shanghai

Advanced Material Incubator, Beijing

Marine Technology Incubator, Tianjin

Multiple Ownership (gov. business. VC. Multinationals)

Networking at central and local levels


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CHINA TORCImprovement in Overall Environment

SMEs Promotion Law implemented in 2003 SME board in Shenzhen Stock Exchange launched in May, 2004

50 Companies listed currently

OTC Stock Trading System (Third Board) Over 10 high-tech companies from Zhongguancun Science P

entered the system A good demonstration of the government's continuing efforts

build a multi-level capital market

Third Board companies are expected to have easier access SME Board or the Shenzhen and Shanghai Stock Exchanges

To be extended to more science parks


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CHINA TORCInnofund: SBIR in China

Supporting projects in early stage commercialization with Innovative technology and

Good market potential but Unattractive for commercial capital

Laying the foundation for industrial expansion and introductioof commercial funds

Targeting at market failure where government support needed;

Bridging the gap of capital market

Incubating innovative start-ups


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CHINA TORCInnofund: Filling the Market Gap

TechnologyGrowth Life Cycle

High Growth &

Expansion

Mature

Idea Prototype

FFF

IPO/M&A

T

Income

VC

CBInnofund

Development

Death Valley


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CHINA TORCInnofund: an Overview

Birth: May, 1999 (www.innofund.gov.cn) Nature: Central Government Funding

Major Statistics (1999-2005)

Applications received: 30,623

Projects approved: 7,962

Total funding allocated: 5.2bn CNY ($ 650 M )

Average funding: 650,000 CNY ($ 81,250)
http://www.innofund.gov.cn/http://www.innofund.gov.cn/


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CHINA TORCInnofund: Target Group

Applicant Qualifications Independent business entity

Involving in high-tech R&D, production/services

R&D investment/sales > 5%

Technological personnel/total employees > 30%

Various ownership (Chinese equity 50% up)

Less than 500 employees


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CHINA TORCInnofund: Funding to Innovation

1089

820872

660

1008

780 780

540

1197

660

1464

830

1552

1000

0

200

400

600

800

1000

1200

1400

1600

99' 00' 01' 02' 03' 04' 05'

Innofund Funding 1999-2005

Projects

Funding

(Million CN


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CHINA TORCInnofund: Technology Priorities

Innofund Projects 1999-2004 (By Technology Field)

2223, 36%

1144, 18%

1042, 16%

1287, 20%

409, 6%

278, 4%

27, 0%

IT

Biotech

Material

Automation

Environment

Energy

Others


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CHINA TORCInnofund: Achievements

Support to Early-stage Companies Emphasized

Start-up companies (


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CHINA TORC

Roadmap Scheme:Joint Efforts to Promote SME Innovation

Growth Roadmap Scheme for Growth of Tech-based SMEs

Initiated by Innofund in 2004 with sponsors including

Innofund Administration Center (Innofund)

Shenzhen Stock Exchange (SSE)

State Development Bank (SDB)

National Incubator Association (Incubators) National VC Association (VCs)

Aim

To create a favorable environment for the development otech-based SMEs at various stages via joint efforts fromvarious aspects


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CHINA TORC

Roadmap Scheme: Total Solution for SMEGrowth

Tech-based SMEs

Innofund

SSE

SDB

Com. Banks

VCs

Incubators

Grant Funding

Default ReserveFund of funds

LoansTraining, OTC, IPO

Tech-based

SME Loans

EquityExit

Services


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CHINA TORCRoadmap Scheme: Missions

Promotion of seed/early stage (Dead Valley) financing

Innofund Investment Subsidy to Start-up projects Grant to tenant company innovation projects which has been inve

by the selected incubators

Support to technological innovations by SMEs

Innofund funding to be strengthened with more attention tocultivate innovative enterprises rather than only the project

Establishment of Innovation Network

Incubators as the nodes

Equity investment by public funds to promote/guide VC developme

Fund of funds to be set up with investment from Innofund totechnology-oriented VC funds (SBIC?)

Leading commercial loans to tech-based SMEs (SDB SME Loans)

Promotion the establishment of a multi-layered capital market syst


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CHINA TORCChallenges: Lack of Core Technologies

57

9

114

69

114

7265

33

0

20

40

60

80

100

120

DVD PC Color TV Mobile

Phone

Key Technology Patents of Major IT Products

Total

Chinese

Note: All the nine DVD patents and ten of the 72 Color TV patents possessed by

Chinese enterprises are not core technologies.

Challenges


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CHINA TORC

Challenges:IndigenousInnovation Capacity st

Weaker

Patent Preemptionand Patent Barrier Advantage in technology monopoly by multinationals

High-priced patent fee thus charged

Independent Innovation Restricted

Market dominancy by large corporation and multinationals h

the innovation and development of SMEs via Acquisition

Branding (OEM)

Market for Technology strategy not ideally realized as exp

Reluctance of foreign-funded enterprises to disseminate technolo

JVs mostly involved in license manufacturing rather than productdevelopment


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CHINA TORCChallenges: Patent Barrier

World Patents in Bio-Engineering

51%33%

12% 4%

USA

Europe

Japan

Others

World Patents in IC Products

55%

19%

16%

10%

Japan

USA

S.Korea

China


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CHINA TORCChallenges: the Recognition

There is still a lack of driving force and overall capacitysustainable innovation in our current economic system a

so


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CHINA TORCFuture: An Innovation-oriented Country

A Strategic Decision: Building up the innovation-orientedcountry

Strengthening the indigenous innovation capacity

Technological innovation system with enterprises as thecore hub, and combine industry, university and research

institution Commercialized S&T intermediaries service system

Regional innovation system with specific characteristicsand advantages


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CHINA TORCFuture: Strategic Missions of Torch

Torch will play an important role to realize the national strateg

Creating innovation headstreams (Growing Seedlings)To reinforce the development of tech-based SME communit

To lower the individual risk and cost of the innovation activundertaken by tech-based SMEs

Developing Innovation Clusters(Forestation)To guide the random innovation activities of SMEs to follow

national development strategy so as to build up the innovation ecosystems representing national

competitiveness

Environment Building (The soil) Capital

Technology

People


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CHINA TORCFuture: Growing Seedlings

Addressing the Death Valley Problem

A socialized and multiply funding system

Enhancing the leveraging effect of public funding (Innofund

Catalyzing the emergence of business angels and promotin

establishment of BANs

Drafting specific policies to promote the effective integratiobusiness angels and technology business incubators

A coordinated integrate fostering system

Continuous implementation of the Roadmap Scheme

Promoting the incubation mode of entrepreneurial tutor (SC

combined with professional incubation


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CHINA TORCFuture: Forestation

Developing Innovation Clusters

Fostering technology innovation alliancesTo promote the networking, interaction and collaboration a

key innovation players

Establishing innovation relay centers (CIRCs)To make easier access for SMEs to applicable innovation

resources so as

To lower the information cost, transaction cost andorganizational cost of innovation activities

Encouraging the upgrading in the value chainTechnology-based Export Promotion Project

From OEM to ODM( Own Design and Manufacturing) &OBM (OwnBrand Manufacturing

COSEP (China Offshore Software Engineering Project)


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CHINA TORCFinal Words: Joint Innovation

We promote joint innovation partnership between Chinese andforeign innovative SMEs via cooperation with counterpart

innovation agencies in other countries:

OESO anvar (France)

CDTI (Spain)

EDB (Singapore) INSME (International Network of SMEs)


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CHINA TORCFuture: Growing Seedlings

Innovative Technologies withGood Market Potential

Entrepreneurial Team

Seeds (Idea)

Sprouts (Products)

High Growth

Innovative SME

Seedlings (MarkFunding System

Fostering System


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CHINA TORCClusters: Hotbeds for Innovation

(B. Klein & Rosenberg

F t O ti i d F di d F t i


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CHINA TORC

Future: Optimized Funding and FosteringSystem

TechnologyGrowth Life Cycle

High Growth &

Expansion

Mature

IdeaPrototype

FFF

IPO/M&A

T

Income

VC

CB

Incubator & Angel

Fostering

Development

Innofund & BAF

Funding


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CHINA TORC

Thank You

promoting sme innovation-china

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