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Last updated: 27 Jan, 2015  

India.China.9.Thmb.jpg SME policy: What China is doing and we're not

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Bikky Khosla | 27 Jan, 2015
With the country's economic growth slowing down, China is doubling down its policies to support its small business sector. Last year, a preferential income tax policy was introduced to provide a corporate income tax rebate to low-income SMEs. Similarly, another measure exempted such SMEs from value-added or business tax. Recently, it was announced that more funds would be released to banks and they, in turn, must lend on to SMEs meeting certain criteria. These kind of measures clearly show the firm commitment and genuine political will of the Chinese leaders to promote their SME sector.

Like India, China has no such investment limit in case of SMEs. The definition is a bit complex instead. The criteria of classifying SMEs are formulated by the government agency in charge of enterprises under the State Council of China, according to a number of factors including, employees, annual revenue and total assets. However, the main emphasis is placed on earning of revenue by a firm. Indian SMEs have long been demanding for a revenue-based classification and it is surprising that our policy makers are always turning a blind eye to this demand.

Another area where China stands out is in its special strategic emphasis on preparing, monitoring and implementing SME related policies. The State Council Leadership Group, headed by the Vice Premier of the State Council, with members from several departments, including ministries of agriculture, IT, science and technology, human resource, and China Development Bank and People's Bank of China, plays a key role in this field. Compared to this, I think we have a lot of scope of improvement in this respect. Particularly, we clearly lack a coordinating effort in this direction.

Efficient bureaucracy is yet another asset of China and it has made the life of small business owners in the country extremely easy. Officials at all levels are disciplined and punctual, and the government maintains a close relation with the bureaucracy in policy implementation, and I think these are the two key factors that our government should stress on if it wants to increase the ease of doing business in India. In addition, China's high quality infrastructure like good roads, uninterrupted power, water supply, etc. has helped a lot its SME sector to prosper, and, needless to say, Indian SMEs are far away from such level of facilities.

I don't think it will be fair to compare India and China in every respect, but as per as improving the business ecosystem for SMEs is concerned, I think we certainly have a lot to learn from our neighbour. I invite your opinions. Please share your insights with our readers. 
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Cost for doing business in India is 9 times higher than China
Bhagawath Prasad | Wed Feb 18 15:56:20 2015
Though required infrastructure is missing to run businesses in India , we can still perform better than China , if the following few are made available at half the price of current levels , Cost of Finance,power ,labor and land , in addition to strict implementation of clearing bills within 15 days by private and public sector companies , and of course strict monitoring or if possible eliminating tax authorities harassment and their huge demands

Why chaina is doing & we are not
O.P.Khandelwal | Wed Feb 11 05:13:54 2015
In my experience there is no support of Govt., to the small scale business.To start the business he has to obtain more than 30 licences.To obtain licences, Sometimes small businessmen knee down in front of Bureaucracy , but no effects on bureaucracy. There is no such system to know the problems faced by the small businessmen & there is no strong platform where the businessmen represent in front of Govt. to solve his all the problems in time limit. Bribes is also a big problems. Govt. must make a monitoring team headed by Successes businessmen & Minister of the concerned sector those can early help small businessmen ,with time bound programme.

Harassment from govt depts
Sanjay gandhi | Thu Feb 5 01:19:57 2015
See to run an industry you require some basic 27 licences by the time you apply and get this you are almost reached to frustration the reason instead of educating how to get this licences this govt officials only demand bribes which is 25 to 50 times more than the actual fees and also they find fault which is irrelevant

SME policy: What China is doing and we're not
STAR METAL FORMS PVT LTD | Wed Feb 4 22:32:03 2015
What economical strength China has, we do not have but the difference is there.Compared to China we own lesser manufacturing units. Its high time govt takes some steps to help survive industries.

SME policy: What China is doing and we're not
Sunil Agarwal | Wed Feb 4 16:55:33 2015
As in India SME are struggling to improve quality as per world standard but need support from our government for technology improvement and market potentiality about to sold there products.

I Dash | Fri Jan 30 14:19:45 2015
Very insightful and correct opinion about China. I completely agree that China can't and ideally should not be compared with India for every business/economy level activity. The governments, attitude, vision of both the countries are different on many levels and often our govt policies and politics fail to fulfill the basics of running a thriving business by a SME. Additionally you are correct in pointing that traders never demand or fight for their rights and suffer because of this. We have to fight for everything and that has to be done cohesively. Please reach out to as many traders in India via a Hindi news letter as well so that more people know about trending news and ideas to take their businesses forward.

SME Policy -China
R. Sebastian | Thu Jan 29 11:20:33 2015
Mr Modi now has a very big job to pry open the entire Nehru & Former Maharaja empire since Independence ---nearly 70 years. Now hope he will be making easy for the man in the street to start a business.

SME Problems in India
Biswanath Bose | Wed Jan 28 10:19:57 2015
Dear Sir, It's true and over on that if new company has any Bank loan then it becomes nightmare for new Enterprise. Chinese Banks give 5 year flexibility for Bank loans because they know that One SME/Brand needs approx. 5 year to establish their business but Indian banks needs to collect their money from next month and if you are 2/3 months defaulter then Banks will humiliate you by sending recovery agents and all other terrible means. If you have below minimum balance on your companies account then they will deduct you any amount as bank wish. Electric supply & BSNL will disconnect your connection if you are one month defaulter but they can give free electric to Govt. or political agencies. Govt. has no cooperation and/or attention on this small problems, which affects SME very badly. Govt./Banks/Elec./Tel. all work together with only one goal to close down the new SME ASAP and breakdown the dream of any New SME Enterprise in such a way that nobody should be dare to be the new entrepreneur in future. Govt. strategies never looks like that they are really interested on SME development except for Media bites even thought SME provides and can improve the maximum employments in India. Hope all stake holders will take all the positive stapes to improve SME.

SME policy: What China is doing and we're not
Gope.H | Wed Jan 28 10:12:41 2015
Greetings, yes agree many points, like infrastructure, policies, etc. have being living here for 11 years, 1. here the land, property belongs to govt, so they have all the money. 2. one party, so decision are made fast. 3. I have visited 200 companies, but the worker efficiency is high, no force. 4. people don't waste time on gossiping, rituals, complains, blames, but work and enjoy. So it is collective, govt is made of people, they have vision and confidence. only set back i feel, they went too fast, so pollution problem, but not late, as they have realized and some sectors they have slowed down, developing rural areas, developing local service sectors.

An ancient situation
Ian Gould | Wed Jan 28 09:10:59 2015
This is repetition of an ancient situation. I gave a talk to the Export Promotion Council Bombay in 1971 on this potential development and the massive Red Tape of India continues to strangle the economic and manufacturing viability of the country. Comparisons are odious, especially when they are continually exhibited - minus change.

At least basic facilities
Nik | Wed Jan 28 08:44:49 2015
Dear sir, I am agree with this article. Definitely, our SME industry needs more facilities. At least our govt. should provide basic facilities like road, water & electricity to our SME.

Dream business ecosystem
Vinay Joshi | Wed Jan 28 07:36:04 2015
It is a good article. You have explained all points in very limited words. It seems that the environment for SME's in China, is like one dream for. We hope the dream will come true in India also. This may be the main contributor for low cost at China. Regards, Vinay Joshi, Onyx India Engg Pvt Ltd

Franco | Wed Jan 28 05:53:34 2015
Dear Sir, yes you are correct that we are far behind china.The Tax is the major issue and complicated.About funding SME from Local Banks,The top manager is unaware how to process the application.The Indian requirements for a loan is higher then Mount Everest by looking at mount averse I take a u turn and better to mortgage.The local banks which is funded by government does not want to improve, more new programmes are displayed from top but the staffs at the bank have no idea that such new programme are existing. We need sea change in all the departments. China at one time in 1975 was at the same level but today its gone far away. Its possible to go closer to China but need hard work from our government

  Re: SME
Ian Gould | Wed Jan 28 09:22:06 2015
As the French would put it 'l'meme chose - sans change!'Tax is always complicated but even so, the major power house nations manage, if not perfectly, to overcome hurdles of taxation, Having lived in India and shared joint ventures there, I, like many Westerners, feel that it will require a long term iron hand to eradicate the negative characteristics of past centuries.

SME Policy : China Economy
Prof. K.Y. Shiralkar | Wed Jan 28 05:27:59 2015
We need to develop on Infrastructure a lot but parallel to this we need to work on our professional education, we need to produce professional knowledgeable engineers in all areas of engineering education

Shibu T Varghese | Wed Jan 28 05:01:24 2015
1. Every area should have industrial office 2. If any person interested to start any business or industry, help him/ her the viability of the industry and the steps to be taken. 3. In Indian most of them start business with proper financial management (ie : Capital, working capital, stocks ,subsidies , how to start marketing , what was the steps to be done ) 4. Industries dept should give more help for getting license etc , with nominal charges no unofficial charges should be imposed .

There is a ray of hope
Ashok Nanda | Wed Jan 28 04:43:56 2015
With the time Narendra Modi is becoming more and more powerful. Once he established his party (full majority in most of the states) definitely he will come out with such plans to improve economy of country.

Translation of your articles
Mohammad Khosravi | Wed Jan 28 04:24:48 2015
Dear Sir, I am an Iranian citizen, but live in Canada. I used to read your articles. They are very interesting and useful. I admit I learnt many things about SMEs and Indian economy and trade. It could be useful for many people in Iran who might be interested to know about SMEs and Indian economy. I would like to translate some of your articles for use of Iranians who are involved in business. Of course, I do need your permission to do so. Please let me have your opinion. Best regards, Mohammad Khosravi.

  Re: Translation of your articles
SME Times | Wed Jan 28 05:51:20 2015
Please contact at

Fully agreed with the views
Chirag Shah | Wed Jan 28 03:50:16 2015
Fully agreed with the views. Not only SMEs but in all sectors like agriculture, transportation, etc small & medium scales need to be strengthened. It is the backbone of nation & direct mean of earning of a family & of course contributes fundamentally in growth of nation. Views must reach to the government.

SME policy
Srivathsan.R. | Wed Jan 28 01:54:43 2015
The article highlights many relevant issues particularly Bureaucracy. Our Indian bureaucracy is embedded with British culture and British DNA, The present bureaucracy believes that he is paid by British govt and has the right to harass and reduce productivity. Britishers designed that for Indian govt so that Indian do not rise. Still we have that DNA . The second most important factor is to introduce TRANSACTION charges instead of outdated INCOME tax, which has a negative impact.It is a forced philanthropy. Transaction tax encompasses the entire population and govt gets its revenue without hassles, just like transaction tax in equity market. No tears for the payer, no paper work, no chartered accountants to twist the matter, . It is plain, simple, straightforward. All firms, manufacturers or service providers will make or pay his payment only through digital media and not cash ( increase non cash transactions at all levels by introduction of RAPY cards for electronic payments, insurance sector, telecom sector, petrol diesel, fertiliser seeds pesticides, deals of land,plots, health sector, education sector, food sector and similar areas under gradual progress.

Quality product India's edge
John (CEO @ The Design Station Ltd UK) | Wed Jan 28 00:09:25 2015
All though I empathise with the comparison between China's and India's lack of equality between their respective Governments investment limits I feel that I should mention that the reason I buy from India is because the products produced in India are of the quality, style and class of product that best suites the look of product that we feel our customers would appreciate more so than the highly over manufactured and packaged products that China offered to manufacture for us. The quality and service offered by our manufacturer Is In my experience second to none and nothing is too much trouble for him to do on our behalf with him travailing many miles to neighbouring cities and towns to find accessories and manufacturing materials to make our products, Quality's that I think I'd really have to look very hard to find in our UK companies. In closing perhaps a little helpful advice to the Indian Government, If every manufacturer even the one man outfits in the back streets of India were to pay the taxation that they should and all government departments didn't run on the illicit backhand payments they receive then there would be sufficient funding for everything and anything required including investment in SME's so where do you start?

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