LOGO Building an Eco-system for SMEs Frank G.Liang China Torch Program Administration

Outline 2 Practices in China 3 3 Why an Eco-system 3 1 The Importance of SMEs

 SMEs in China  Rapid Growth since 1978  Currently 42 million SMEs, 99% of all businesses  Major Economic Players  60% GDP  75% urban jobs  68% export  53% tax revenue  Vital Innovation Driving Force  65% invention patents  80% new products The Importance of SMEs

Why an Eco-system: Entrepreneurship  Entrepreneurship: Headstream for Firm Creation & Innovation.  Entrepreneurship: Developed via Practice in Real World, with influences from related aspects:  Education: entrepreneurial spirit and culture, not only MBA  Culture: mercantile doctrine vs. venturing spirit  Policy: only 20% tech-based SMEs are incubator tenants

 SME Growth: Demand at different stages High Growth & Expansion Mature Idea Prototype FFF IPO/M&A Time Income Development Death Valley Why an Eco-system: SME Growth

Why an Eco-system: Growth-Driven  Entrepreneurship and SME Growth are Driven from various aspects Culture Influence Government Behavior Market Competition Entrepreneurship SME Growth Resource Availability

 Government (“The Visible Hand”)  Policy: SME Law, Tax incentives for high-tech enterprises  Investment Leveraging: Innofund  Institutional Arrangement: Incubators, Clusters  Market (“The Invisible Hand”)  VC: Profit-driven to high-growth, high-return businesses  Capital Market: Main Board SME Board (2004’) Growth Enterprise Board (2009’)  Competition Natural Selection Core Competence Practices in China: Concerted Efforts

Grant Funding Guided I nvestmen t Entrepreneur Tutors VC CB FFF Hi-tech Enterprise/ Tax Deduction OTC SME Board A policy framework conducive to the creation and development of tech-based companies along the innovation chain has been basically formed up. Practices in China: Policy Framework Entrepreneur Tutors Incubators Univ. Science Parks Incubators Univ. Science Parks Growth Enterprise Board Innofund

Entrepreneurial Education Incubators Entrepreneur Tutors Entrepreneurial Environment Practices in China: Promoting Entrepreneurial Culture University Science Parks

Business Government Funding Basic Research Applied Research Product & Process Development Pilot Production Manufacturing Technical Services Focus 973, Nature Science Torch program 863, Key Tech Practices in China: Strategic Arrangement

Mission1 Mission 2 Mission3 “Seedling Engineering” to cultivate tech-based SMEs “Forestation Engineering” to develop innovation clusters Optimizing the industrialization environment Practices in China: Torch Program

Technology Business Incubators Technology Business Incubators Innovation Fund for Tech-based SMEs Innovation Fund for Tech-based SMEs The Roadmap Scheme for SME Growth The Roadmap Scheme for SME Growth Tech-based SMEs (“Future Stars”) Seedling Engineering Entrepreneur Mentors Program Practices in China: “Seedling” Start-ups (“Seeds”)

Fostering Technology Innovation Alliances Reinforcing Technology Transfer Activities Promoting Industrial Upgrading Forestation Engineering Practices in China: “Forestation” Innovation Clusters STIPs Software Parks Specialized Bases

Practices in China: Technology Business Incubators  A major policy tool under Torch Program  The first TBI established in Wuhan city in June  Currently 614 TBIs across the country, 197 of which identified by MOST as national-level TBIs.  A strong force to promote entrepreneurship and innovation, providing (by end of 2007”)  a total incubation space of 22.7 million square meters, housing  44,750 tenant enterprises which employed  933, 000 people and generated  a total business income of billion RMB with  25, 214 patents applied  23,394 enterprises graduated accumulatively

 Torch Entrepreneur Mentors Action Program  Bringing professional and practical business mentoring to entrepreneurs and tech-based SMEs,  Reinforcing the incubation capacities of TBIs, which will serve as the bridge between the tenant companies and the mentors  supported by a volunteer team composed of working and retired technopreneurs, executives and corporate leaders; investment and financial experts; notable business counselors as well as other professionals with extensive experience in S&T fields. Practices in China: Entrepreneur Mentors

 Aim  Addressing the problem of “Market Failure”  Leveraging Investment into SME Innovations  Funding Tools  Grants for Tech-based SMEs  Subsidies for SME Service Agencies  Tech-based SMEs Venture Capital Introductory Fund (Seed Fund) Investment Subsidy Equity Investment Practices in China: Innofund

 Facts & Figures ( )  Applications: 40,324  Projects approved: 11,980  Total funding: 7 billion CNY.  Average funding per project: 585,000 CNY.  Leveraged funding: 40 billion CNY local governments Commercial banks, VC & private capital Practices in China: Innofund

Practices in China: Roadmap Scheme  Aim  To create a favorable environment for the development of tech-based SMEs at various stages via joint efforts from various aspects  Main Players Innofund Administration Center (Innofund) Shenzhen Stock Exchange (SSE) State Development Bank (SDB) National Incubator Association (Incubators) National VC Association (VCs)

Road Map Scheme: A Total Solution Tech-based SMEs Innofund Stock Exchange Policy Bank Com. Banks VCs Incubators Grant Funding Default Reserve Fund of funds Loans Training, OTC, IPO Tech-based SME Loans Equity Exit Services

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