Business professionals attending the 3rd China Private Entrepreneurs Summit (November 4-6) in Hangzhou agreed that a combination of independent innovation and corporate branding is the key to long-term development for private enterprise.
The summit, the largest ever of its kind attracted over 2,000 domestic entrepreneurs, economists and overseas Chinese businessmen.
The average life span of a private business is only 3.5 years in China. Even in Zhejiang Province where economic development is booming, a company has an average shelf life of only 7 years.
"Private businesses want quick success and instant benefits", said Guo Fansheng, chief executive officer of Huicong International Information Co. Ltd.
Guo added that private businesses often try to grab market share through publicity stunts. They rarely have an in-depth understanding of branding. This is why brands such as Qinchi (liquor) and Aiduo (home appliances) have not been able to stand the test of time.
He said a brand should incorporate morality, product quality and a sound corporate culture, and should be backed up by sci-tech innovation.
"Research and development (R&D) and sales, rather than low cost production, are where high profits come from", said Zheng Yumin, director of Zhejiang Provincial Administration of Industry and Commerce.
China's export volume was valued at US$593.36 billion last year and recorded a trade surplus as high as US$31.98 billion. However, many experts believe that current export advantages that are too reliant on low prices are not sustainable. They will eventually attract negative reactions in the form of quotas and tariffs, and they could spark off attacks on Chinese establishments such as the arson incident in Spain in September 2004 where warehouses filled with Chinese goods were burned down.
China does not have a monopoly on a good investment climate and cheap labor, Yu Jiyan, general manager of Zhejiang Kaikai Cable Company Limited, said.
Since 2004, China has reported problems with skilled labor shortages, energy shortages and escalating prices of raw materials, indicating that the "Made in China" label doesn't necessarily equate to cheap products anymore, Yu added.
A common complaint among domestic enterprises is that technical standards imposed by importing countries are essentially trade protection mechanisms. However, only 50 technical standards out of more than 8,000 in recent years are actually trade barriers, according to Long Yongtu, secretary-general of Boao Forum for Asia.
Long said that Chinese enterprises should regard these technical standards as the impetus to further improve their own product quality, and build their brands.
An encouraging piece of news from the summit is that over 300 R&D centers have been set up in China by multinational companies (MNCs).
Such a development is expected to strengthen the domestic innovation situation. Through the development of independent innovation and the strengthening of international cooperation, Chinese enterprises should be able to make their way from the low-end of the global industrial chain to the middle or high end, Long said.
(China.org.cn by Yuan Fang November 14, 2005)