Lin Jiabin

Research Report No 231, 2000

I. General Description

In order to get a comparatively complete picture of the situation of the development of small and medium-sized enterprises in China and the problems facing them, and to provide the basis for formulation of policy measures to support their development, the Research Department of Development Strategy and Regional Economy of the Development Research Center of the State Council picked four provinces, Guangdong, Liaoning, Hubei and Yunnan, for a questionnaire of the problems and needs of small and medium-sized enterprises in the course of development. A total of 2,800 questionnaires were distributed in December 1999, and 1,121 valid ones were recovered. Covered in the questionnaire were enterprises of all kinds of ownerships in all major trades. Table 1 shows the distribution of the respondent enterprises covered in the questionnaire. The contents of the questionnaire included mainly the performance of these enterprises, their basic quality, their major problems in development, and their needs to be met by government and socialized services.

Table 1 Distribution of enterprises covered in the questionnaire

	Number of enterprises	Percentage
Sum total	1121	100.0
By ownership   State ownership   Collective ownership   Private ownership   Sino-foreign joint venture   Associated   Others   Blank	388 351 119 73 19 148 23	34.6 31.3 10.6 6.5 1.7 13.2 2.1
By industry   Capital goods in the manufacturing sector   Intermediary goods in the manufacturing sector   Consumer goods in the manufacturing sector   The tertiary sector   Others   Blank	263   297 297 65 144 55	23.5   26.5 73   26.5 5.8 12.8 4.9
By region   Guangdong Province   Liaoning Province   Hubei Province   Yunnan Province	216 548 165 198	19.3 48.9 14.7 17.7

Notes:

1. The item “Others” in the ownership section includes shareholding companies, limited liability companies, Sino-foreign cooperative enterprises, exclusively foreign-owned enterprises, and enterprises with investment from Hong Kong, Macao and Taiwan.

2. The industries mentioned in the item “By industry” are synthesized from the 15 trades covered in the questionnaire. These industries cover the following segments: Capital goods in the manufacturing industry includes machinery and electronic and electric appliances. Intermediary goods in the manufacturing industry includes chemicals, building materials, textiles, construction and metallurgical product. Consumer goods in the manufacturing industry includes foodstuff and light industrial product. The tertiary sector includes transportation, telecommunications, commercial, catering, and other services.

Covered in the item “Others” are those other than mentioned above.

3. The figures are those for 1998. The same herein below unless otherwise indicated.

II. Operational Situation of Enterprises

We used three indexes -- business revenue, total profit, and asset-liability ratio – to study the operational situation of the respondent enterprises covered in the questionnaire and the changes in the situation. See Table 2 for the results.

Table 2 Operational situation of enterprises

	Business revenue (RMB 10,000)				Total profit (RMB 10,000)				Asset-liability ratio (%)
	1995	1996	1997	1998	1995	1996	1997	1998	1995	1996	1997	1998
Aggregate average	3398	3544	3756	3484	84	12	-58	-36	73	80	83	84
Average by ownership
State ownership	4591	4564	4572	4102	14	-58	-88	-188	68	76	81	87
Collective ownership	2478	2328	2808	2734	339	203	193	179	54	66	69	49
Private ownership	1431	2101	2104	1802	-925	-922	-876	-645	126	123	134	131
Sino-foreign joint venture	1157	2463	3343	3117	64	133	225	171	81	79	75	58
Associated	2373	1588	1218	1761	45	13	39	12	81	73	77	80
Others	4699	5324	5301	5540	295	260	-287	208	61	69	66	74
Average by industry
Capital	2028	2119	2211	2018	307	120	74	51	71	73	78	68
Intermediary	4870	5132	5456	4933	284	256	144	26	57	70	77	83
Consumer	2983	2629	2939	2971	-312	-344	-258	-284	99	97	100	98
Tertiary	2328	2534	2835	2833	108	79	85	48	83	91	92	79
Others	4492	5582	5280	4699	53	6.6	96	103	70	79	76	74
Average by region
Guangdong	2267	2388	2417	2765	438	206	-261	172	86	90	89	76
Liaoning	1871	1695	1579	1305	-226	-248	-208	-216	96	99	100	101
Hubei	4282	4280	5626	5718	301	319	327	313	42	60	58	57
Yunnan	6515	7117	7410	6489	424	277	200	-30	56	65	73	79

Notes: In the item “Average by industry,” “Capital” refers to capital goods from the manufacturing sector, “Intermediary” to intermediary goods from the manufacturing sector, “Consumer” to consumer goods from the manufacturing sector, and “Tertiary” to the tertiary industry.

The results of the questionnaire showed that the business revenue of the respondent enterprises increased year by year between 1995 and 1997, but it dropped in 1998. Changes in jointly-run enterprises, however, moved oppositely to that in the overall situation: dropping year by year between 1995 and 1997 and hit the bottom and bounced back in 1998. The profit of the respondent enterprises declined year after year between 1995 and 1997, and even went into red in 1997 when viewed as a whole. The amount of losses decreased somewhat in 1998. The situation differed much, however, between enterprises of different ownerships, in different trades, and in different regions. Of the enterprises of different ownerships, privately-run enterprises suffered the biggest loss, followed by State-owned enterprises. Among the enterprises specializing in different trades, only the consumer goods sector of the manufacturing industry suffered year-by-year losses, and the profit of those in all other trades remained positive. The profit of the capital goods sector and the intermediary goods sector of the manufacturing industry, however, kept falling year by year. Among the enterprises in different regions, those in Liaoning Province suffered losses year by year, the profit of those in Yunnan Province kept sliding down and was in deficit in 1998, those in Guangdong Province fell into red in 1997 but turned the situation of losses into one of profit in 1998, and those in Hubei Province maintained their normal level of profit all the time. The asset-liability ratio of the enterprises covered in the questionnaire kept rising year by year, hitting 84 per cent in 1998. This means a fairly high level of liability (According to “China Yearbook of Statistics, 2000”, the asset-liability ratio of China’s State-owned and State holding industrial enterprises was 62 per cent in 1999, while that of large and medium-sized industrial enterprises was 60 per cent). Among the enterprises of different ownerships, privately-owned enterprises had the biggest asset-liability ratio, standing at 131 per cent, followed by State-owned enterprises with an asset-liability ratio of 87 per cent. The asset-liability ratio of collectively-owned enterprises was the smallest, standing at 49 per cent. Among the enterprises specializing in different trades, the tertiary sector had the biggest asset-liability ratio of 97 per cent, and the capital goods sector of the manufacturing industry had the smallest of 53 per cent. By regional division, Liaoning ranked at the top with an asset-liability ratio of 101 per cent, and Hubei stood at the bottom with a ratio of 57 per cent.

III. Basic Quality of Enterprises

We made simple appraisal of the basic quality of the enterprises covered in the questionnaire by three indexes: the composition of the academic credentials of their employees, the proportion of those that had passed ISO9000 certification, and the ratio of compliance with State standards on the discharging of pollutants.

Viewed from the academic credentials of the employees, those who had received education at and above the polytechnic level (including education in technical, vocational and senior middle schools) accounted for 15.8 per cent of the total in 1995 and 19.1 per cent by 1998. Although this revealed a trend of elevation, the level was still fairly low (According to “China Yearbook of Statistics, 2000”, the number of employees in 1999 who had received education at and above the polytechnic level accounted for 15.7 per cent of the country’s total number of employees including those working in the rural areas).

Viewed from the proportion of those that had passed ISO9000 certification, only 201 or 17.9 per cent of the 1121 valid respondents passed the ISO9000 certification. Divided by ownership, those under the item “Others” boasted the biggest ratio of passage at 29.1 per cent, followed by Sino-foreign joint ventures at 28.8 per cent. Privately-run enterprises were in the rear at merely 14.3 per cent. Viewed from the ratio of compliance with State standards on the discharging of pollutants, the total ratio of compliance was 70.5 per cent. In other words, nearly 30 per cent of the enterprises covered in the questionnaire were not yet up to State standards so far as their discharge of pollutants was concerned. Among the enterprises of different ownerships, Sino-foreign joint ventures boasted the biggest ratio of compliance at 80.8 per cent, and private enterprises came the last once again with a ratio of 67.2 per cent.

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