Financing problems hit start-ups: experts
The State Council, China's cabinet, on Tuesday released a set of guidelines to promote entrepreneurship and innovation, in a move to add vitality to the country's slowing economy.
The government will further streamline the registration process for new companies and strengthen protection of intellectual property rights to support innovation, according to a statement posted on the central government's website on Tuesday.
More fiscal support and favorable tax policies will also be introduced to back small companies, the statement said. Besides, governments at all levels are encouraged to purchase innovative products and services from start-ups to support their development.
Premier Li Keqiang first mentioned the idea of boosting "mass entrepreneurship and innovation," or encouraging people to start their own businesses, at the Summer Davos Forum held in North China's Tianjin in September 2014.
The idea was reiterated in the government work report delivered by Li at the third session of the 12th National People's Congress in March.
"The guidelines are expected to boost investment in innovation and motivate people to start their own businesses, which could bring support for China's economy," Tian Yun, editor-in-chief of the Macro China Information Network, told the Global Times Tuesday.
China's economic growth slowed to a six-year low of 7 percent in the first quarter of this year. The government has rolled out a slew of pro-growth measures during the past few months, but data for major economic indicators such as inflation and trade still points to continued downward pressure.
Experts noted that the bottom line for policymakers is to maintain stable employment, and more start-ups can help in this regard. So supporting entrepreneurship can play an important role in employment, the statement said.
However, Tian said that people may still lack enthusiasm for starting their own businesses given the overall underperforming economy.
"Domestic demand is still weak, and entrepreneurs are discouraged by problems such as the difficulty of raising financing," Tian noted.
Fan Jie, a partner with Adfaith Management Consulting, also considers financing difficulties to be the biggest problem for small businesses.
"It is very hard for small companies to get loans from banks these days, because unlike big companies, they don't have large assets to offer as collateral," Fan told the Global Times Tuesday, noting that more diversified financing channels for small businesses are needed.
The guidelines on Tuesday encouraged small companies to consider stock market listings or issuing bonds in order to raise funds. The authorities are also considering allowing Internet firms that are still making losses as well as those using a special equity structure to get listed on mainland markets.
Due to high access thresholds and some regulatory issues in mainland markets, many start-ups, especially Internet firms, adopt an equity structure called VIE (Variable Interest Entities) to get listed overseas.
Internet giants like Alibaba Group, Baidu Inc and Tencent Holdings have adopted such equity structures.
The government has attached great importance to the fast-growing Internet sector, which has been a major source of innovation. The guidelines on Tuesday also noted that people are encouraged to seek opportunities in the "Internet Plus" plan.
The concept of "Internet Plus" involves connecting online technologies with offline businesses, and was also brought up in the government work report in March.
"These support measures will surely boost confidence among people who want to start their own firms," Fan said, adding that young people in China, especially college graduates, are keen on setting up their own businesses.
The guidelines noted that efforts should be made to develop incubators to provide better services for start-ups and innovative firms. Foreign firms are also encouraged to invest in start-ups in China, according to the statement.
