The Pain Of Industrial Pfer: Where Should Guangdong Go?

The first "breaking seven" of the renminbi has attracted the attention of the Canton Fair, which is being held. The decline in orders for labour intensive enterprises such as textiles, footwear, household appliances and so on has long been expected.

In fact, the Pearl River Delta is experiencing an unprecedented pain: tens of thousands of factories are facing closure, and a larger number of small and medium-sized enterprises are planning to move out.

Will the "factory of the world", which is lively and brilliant, become a history?

In the throes of high pressure, restlessness, hesitation and confrontation, Guangdong is standing at the crossroads of fission.

On the land of Guangdong, there may be millions of potential "Ma Yun". The key is how to create a good environment and mechanism so that they can grow up.

Nandu: as a business school professor, you have studied and studied the situation of attracting foreign investment and local enterprises in China for more than 10 years.

So, Massachusetts Institute of Technology, where you are now (MIT), launched the China Lab project to help China's small start-up enterprises. What was the reason for setting up this laboratory?

What is the concrete operation of the laboratory?

Huang Yasheng: after 30 years of reform and opening up, the number of private enterprises in China is very large, but the quality is generally low.

According to the survey data of the National Federation of industry and Commerce in 2006, there are several indicators that can explain the problem: the average ratio of employee training expenditure to enterprise sales income is only about 1%, and 25% of the enterprises have zero training input to employees.

Since 2000, China's macro-economy has undergone tremendous changes. However, the proportion of enterprises' technology investment in sales revenue has not increased.

For example, Guangdong is now faced with the challenges of increasing labor costs and raising raw material costs. If enterprises have a good mechanism and management and have independent innovation capability, it will be able to digest this challenge.

Let us look at the experience of Japan and South Korea in the 80-90 century, when they encountered similar problems, such as currency appreciation, labor cost increase and so on, but their better companies did not lose competitiveness. Instead, they seized the opportunity to grow into large multinational companies.

TOYOTA motor was still producing low-grade cars in the 80s of last century. It is no stronger than Chery today. But after the appreciation of the yen, TOYOTA immediately innovated on its products and launched Lexus and other high-end products to achieve its upgrading and pformation.

By contrast, our Chinese enterprises obviously do not have the ability to cope with them.

I have been doing academic research in this field in MIT, and I often ask myself if I can do anything to help Chinese SMEs improve their management and innovation ability.

Because the innovation of any country is mainly dependent on small and medium-sized enterprises.

This is the initial idea of launching the Chinese laboratory.

My MIT business school student is actually a huge resource. Most of them are not graduating from undergraduate school. They are young people who have had several years of work experience. They are twenty seven years old. And many of them are originally world-class consulting firms or investment banks like McKinsey and Goldman Sachs.

They go to school on my side, and I have two years' free use of these resources. Based on this consideration, the Chinese laboratory can provide free training to SMEs in China.

We have been doing this project for 7 years. As for the criteria for selecting enterprises, some of them are recommended by alumni of Fudan University business school, which we are working with, some of which are familiar with some risks and private equity investment enterprises. But these are all recently established entrepreneurial companies. There are 20 Applications this year. We only chose 12 of them, and 3 in Guangzhou.

We are not most interested in the high-tech enterprises that we usually think of. We value the enterprises that are related to the daily life of the people. For example, we have a community medical company in Hangzhou, a company in Guangzhou doing an economic chain hotel, and a furniture and branch airline in Kunming.

Our ultimate goal is to enable SMEs to recognize the value of business management.

Nandu: as a leader in Guangdong's reform and opening up, the number and output value of small and medium-sized enterprises have always been the highest in the country.

However, at present, the development of SMEs in Guangdong is also facing some difficulties.

Some time ago, Wang Yang, Secretary of the Guangdong provincial Party committee, went to Hangzhou to pay a visit to Guangdong, and invited Ma Yun to cooperate with Guangdong to open up the Guangdong market.

What do you think of Ma Yun phenomenon?

What can the government do to support SMEs' innovation?

Are there any areas for improvement in Guangdong?

Huang Yasheng: Why are all good Chinese private enterprises in Zhejiang?

Ma Yungang started his own business in Shanghai. He felt that Shanghai's business environment was not good enough to run to Zhejiang.

It can be seen from this point that the government had better not do anything that interferes with the operation of the enterprise, so long as we can do well the local business environment: for example, we should cancel the complicated examination and approval procedures, not suppress the self-employed individuals, provide some information to the SMEs in finance, and provide some loan guarantees to some extent.

As for inviting Ma Yunlai to cooperate, it may be more of a gesture.

Ma Yun did not pull in, but provided a good environment for him to grow up himself.

We should look at the phenomenon of Ma Yun so that Shanghai did not keep Ma Yun. Maybe it was a case, but he did not keep Ma Yun. Why did he not produce Liu Yun, Li Yun and Zhao Yun?

This is the problem of system and environment.

Guangdong should look at the phenomenon of Ma Yun: there may be millions of potential "Ma Yun" on the land in Guangdong. The key is how to create a good environment and mechanism so that they can grow up.

Otherwise, even Ma Yun himself, at the beginning of 1990s, you asked an official to judge if he could become a good entrepreneur in 10 years.

I can't tell.

Whether Ma Yun is a good entrepreneur or not depends on the market.

If the market is running, naturally, Ma will stand out.

I think the so-called emancipation of the mind is to learn from the experience of the Zhejiang model and give enterprises more economic freedom.

Nandu: lack of funds is a prominent problem faced by SMEs.

Then, what are the supporting policies for promoting the innovation and development of SMEs in Britain, France, Japan and the United States?

What are the main means of financing for SMEs?

Huang Yasheng: the importance of these countries to SMEs is reflected in the employment I just mentioned. Western democracies attach great importance to employment, and employment is mainly provided by small and medium-sized enterprises.

In a market economy country, the government usually does not provide guarantees to large business bank loans, but it will provide some risk guarantees to SMEs.

In China, on the contrary, the government only provides loan guarantees to large enterprises, especially large state-owned enterprises, and small businesses do not guarantee them, but also restrict bank loans to them.

Now, a large number of studies in academia have shown that protecting small and medium-sized enterprises can not only promote employment, but also promote technological progress.

Scholars' research shows that the vast majority of innovation in the United States comes from small and medium-sized enterprises.

Silicon Valley, we often mention this word in China, but no one has ever studied Silicon Valley exactly.

Those giants who grew up in Silicon Valley are all self-employed.

Now Microsoft is a IT giant with strong innovation ability.

But what company was Microsoft in 1975?

It's a self-employed person. Two students who haven't graduated have gone to start their own business.

After Microsoft became the world's top 500, many of its innovative technologies were acquired by acquiring small companies.

The contribution of small and medium-sized enterprises to the society has at least three roles: one is to bring employment, the other is to bring about competition. The three is that the knowledge innovation power of large enterprises is generally very weak, and it is necessary to acquire innovative capabilities through purchasing small and medium-sized enterprises with innovative capabilities. The two is that the small and medium-sized enterprises have the ability to innovate.

In contrast, the practice of Shanghai is to drive away all small businesses.

I once chatted with officials in Shanghai, and I asked them why they were doing this.

Their answer is sounding and the product needs upgrading.

I continued to ask, what is the replacement of products?

For example, one is the production of textile factories, the other is the production of computer keyboard factory.

If you let an official make a judgement, which is the high-tech industry?

Surely he will answer, of course, the factory that produces computer keyboards.

In fact, on the contrary, to what extent is the scientific and technological content of textile production now?

A French sportswear company hired MIT biologists to do product design to study how the product reacts to the human body when sweating. The technology is very high.

And the production of computer keyboard factory, technology content is very low.

If the textile enterprises in the market continue to develop, they will naturally develop towards high technology.

But now that the government has shut down all of them and officials have replaced the market, they have lost the chance of pformation and development.

Professor Huang Yasheng graduated from Harvard University in 1985 and served as a consultant to the world bank for 1987-1989 years. He was a Harvard doctorate in 1991 and then an assistant professor at Michigan University. He taught in Harvard Business School in 1997-2003 and became a tenured professor in Sloan School of management in Massachusetts Institute of Technology in 2003.

Published works include: China inflation and investment control (published by University of Cambridge press in 1996), and foreign direct investment in China (Singapore Southeast Asian Research Institute, 1998).