SMEs in Foshan: Entrepreneurship, Education, Innovation and Opportunities

The 7th China SME Innovation Service Conference was held at Hilton Hotel Foshan, Guangdong Province, from 4th to 5th January 2019.  The event was jointly hosted by China International Cooperation Association of SMEs, China Centre for Promotion of SME Development of the Ministry of Industry and Information Technology (MIIT), and the Foshan Municipal People’s Government, and our China Going Global (CGG) forum of LC Venture. The CEO of LC Venture, along with his team and some members of the CGG Forum were all privileged to attend the event, their flights and lodging fully covered by the Organising Committee.  Held under the theme, “Opportunities and challenges of SMEs under Belt and Road Initiative” the Conference managed to bring together between 300 to 350 participants from around the world that included state officials, businesses, scholars, entrepreneur, and many invited organisations and other participants.

The Co-founder and CEO of LC Venture and the Managing Director of China Going Global (CGG) Forum Mr. Gaston Chee attended this important event as the main speaker along with other distinguished keynote speakers. Mr. Chee also offered lecture series on entrepreneurship, education and innovation technology and growth opportunities for SMEs in Foshan and beyond.

Gaston Chee offered lecture series on entrepreneurship, education and innovation technology and growth opportunities for SMEs in Foshan and beyond.

Speaking at the event, Mr. Chee highlighted how the historic city of Foshan, tantamount to its rich culture of Kung Fu’s discipline and hard work, has come so far as to become the national manufacturing center to China. Taking advantage of Deng Xiaoping’s Opening up and Reform Policy and its industrial past, the city boasts as one of the most robust manufacturing powerhouses in China. Besides, pioneering in decentralized governance schemes have enabled Foshan and its counties, towns, and villages to adapt and modify policies to suit local conditions, especially with regard to land markets, specialized market clusters, and local social services.

Foshan, tantamount to its rich culture of Kung Fu’s discipline and hard work, has come so far as to become the national manufacturing center to China.

It was pointed out during the speech that the city’s growth can also be attributed to its foreign investment regulation, making it attractive and open to inbound FDI. Such policies have enabled the city to attract multi-billion-dollar investments from around the globe. In fact, due to the Large industrial parks packed with big multinationals like Walmart, DuPont and Invista of US, Toyota, Toshiba and Honda of Japan, Siemens and BP of Europe and LG of Korea, the city has acquired the nickname, “world factory.” The city is also home to Midea, Foshan’s home-grown world’s largest manufacturer of major electric appliances. Besides, the giant electric appliances manufacturer Vanward Electric Appliances Co. Ltd. and the leading gas appliances manufacturer, Galanze Group and many others are located there.

The city of Foshan is an interesting case study to understand the Chinese economic miracle and the central role SMEs played and continue to play in the economy. The large influx of foreign investment to the city has created a lot of opportunities for SMEs and they are responsible for more than half of the city’s GDP, 60% in tax revenue, 80% of the employment. Besides, unlike the popular belief that Chinese economic success is driven by ample land, cheap labor, and little innovation, up to 70% of the SMEs in Foshan are engaged in innovative technology. Besides, aided by the remarkable record China has shown in its commitment to IP protection, the city of Foshan alone had accepted 73948 applications in 2017 alone. That number has quadrupled and now stands at 274798 today. However, a report commissioned by the Fung Global Institute has identified that regardless of these stats SMEs still have challenges both in terms of growth and global participation. This phenomenon is not unique to Foshan or to China. SMEs still struggle to move up the value chain and to present themselves as global competitors. The report has also identified that with exception of SOEs and government-sponsored projects, access to credit has not been easy for SMEs. Lending rates for shadow banking markets in Foshan are over 20 percent, compared with about 7 percent in the formal banking sector. As a result, many small businesses in Foshan and the rest of China are not able to access adequate credit. This means SMEs have less access to funds to carry out Research and Development (R&D) to develop products or design services that appeal to a wider market, curtailing their growth.[1]

LC Venture, an international investment consultancy firm with a presence in China, the UK, and South-East Asia, has been closely working with the government of China and some regional and global organisations to help SMEs overcome this common impasse by helping them develop a global outlook. The China Going Global (CGG) Forum which was founded under LC Venture is collaborating with key government bodies in China, regional and international organisations and a number of international businesses to make itself a thriving ground where local and international SMEs can meet and forge partnerships help them launch out into global markets and use these partnerships as a vital source of capital and market access. The CGG Forum, which is open for SMEs to subscribe, has a growing representation of businesses from over 30 nationalities and industries that include manufacturing, real estate, architecture, banking, education, media and entertainment, and e-commerce. The Forum’s current local and international business members also benefit from exclusive access to major events and conferences where they have been able to showcase their products and expose themselves to wider global partners and markets. Recently, the efforts of the Company were recognised with an exclusive joint invitation from the APEC SME Ministerial Steering committee and China Center for SME under the Ministry of Industry and Information Technology (MIIT)  to attend the APEC SME Business Forum which was held in Shenzhen on Nov. 27 – 28, 2018. Mr. Chee led a delegation from the members of the CGG Forum to attend the Forum.

APEC SME Business Forum held in Shenzhen on Nov. 27 – 28, 2018

Mr. Chee concluded his speech that as a forerunner in urbanization and manufacturing, Foshan had demonstrated how proper policy balance between the state and local government vision that targeted on SME run manufacturing base and a strong working ethic and resources available can be converted into a very successful economic metropolis. However, Foshan has correctly perceived and demonstrated that unless innovation technology undergirds it, sustaining such level of momentum could be costly or outright impossible. True to this observation, the government of the city of Foshan has backed the establishment of a new group of research institutes and innovation centers to bolster its pillar industry and improve its expansion in the global stage. A total of 12 key projects, with an investment worth more than 90 billion yuan ($13 billion), were signed at the opening ceremony of fourth China (Guangdong) International Internet Plus Exposition, one of the city’s most important events of the year. The Nanhai District government is signing an agreement with Tsinghua University to build an academy for research into new materials. Besides, the district government will collaborate with Alibaba Cloud, a subsidiary of Alibaba, to concentrate on the incubation of promising companies in a wide range of sectors – from big data, smart manufacturing and information security to internet finance and mobile.

National Engineering Laboratory for Multi-Flue Gas Pollution Control Technology and Equipment in
Tsinghua University

The story of the city Foshan mirrors how SMEs can replicate its successes on how they can best learn from the city as a whole and from those local SMEs in Foshan that eventually rose to global success. At LC Venture, through our consultancy and advisory services and the CGG Forum, we have always maintained this approach and we have seen repeatedly how startups and small businesses need the same spirit of hard work and discipline that made the likes of Foshan stand out. In 2014, we acquired the education service brand BeGo, and by following the blueprint of hard work and correct partnerships the business grew into a multi-million RMB in revenue in just under two years and is currently serving over 100 families worth one billion dollars in 15 Chinese provinces. By creating a platform where SMEs can create powerful partnerships and be better equipped with the know-how and innovation technology and some access to finance, our clients are always coached to push themselves high up in the value chain.

BeGo is currently serving over 100 families worth one billion dollars in 15 Chinese provinces.

The event in Foshan concluded with strong recommendations for the need to be in place correct policies that appreciate the role of SMEs in the Chinese economy both in access to finance and partnerships.

[1] Geng, Chase and Chia, The growth of Foshan: A Tale of State and Market, Governance working paper, Fung Global Institute, Dec. 2013, pp. 11.