Small and medium-sized enterprises (SMEs) occupy an important position in the manufacturing industry and bear a significant historical mission in constructing a new development pattern. Guiding SMEs onto the path of specialized, refined, characteristic, and innovative development is an important measure for China to consolidate and strengthen its real economy and pursue high-quality development. Specialized, refined, characteristic, and innovative development is not only the direction of transformation and upgrading of China's manufacturing industry but also the winning strategy for Chinese enterprises to gain a foothold in fierce international competition. As the leaders of the SME sector, 'specialized, refined, characteristic, and innovative' SMEs provide solid support for enhancing the core competitiveness of China's manufacturing industry and play an important role in improving the stability and security of industrial and supply chains, as well as promoting economic and social development.
On September 27th, Mr. Lu Jing, Partner and Managing Director of Frost & Sullivan Greater China, officially released the '2023 China's Specialized, Expertized, Innovative and Emerging Enterprises Development Series White Paper' at the 2023 Second New Investment Expo and the 17th Frost & Sullivan Global Growth, Innovation and Leadership Summit. The paper interprets the development background and current status of specialized, expertized, innovative and emerging enterprises in China from an industry perspective.
Mr. Lu Jing, Partner and Managing Director of Frost & Sullivan Greater China Region
This white paper starts from dimensions such as development trends and competitive landscape. Based on industries in China including automobiles, machinery, environmental protection, semiconductors, computers, communications, consumer electronics, packaging, agricultural machinery, traditional Chinese medicine, CXO, and model animals, it summarizes and analyzes the current development status and industry characteristics of specialized, refined, distinctive, and innovative sub-sectors. The white paper focuses on popular tracks, pays attention to the cultivation of specialized, refined, distinctive, and innovative enterprises in vertical industries, studies the competitiveness of 'little giant' enterprises and their important role in breaking through industry bottlenecks, and uses this insight to understand the future development direction of China's industries.
Part 1 "Specialized, Refined and Innovative" Cultivation Process
01 Current Development Status of Small and Medium-sized Enterprises in China
Chinese small and medium-sized enterprises have developed rapidly and grown into the largest and most dynamic group of enterprises. Against this backdrop, cultivating specialized, refined, distinctive, and innovative enterprises meets the requirements of high-quality economic development. It is an inevitable path for Chinese enterprises and industries to transform and upgrade from 'low quality, low efficiency, weak competitiveness' to 'high quality, high efficiency, strong competitiveness'. In 2022, the number of small, medium, and micro enterprises reached 52 million, with the revenue of industrial small and medium-sized enterprises above designated size accounting for 58% of the total revenue of industrial enterprises above designated size.
02 Current Development Situation of Small and Medium-sized Enterprises in China
The development path of 'specialized, refined, distinctive and innovative' small and medium-sized enterprises (SMEs) is an inevitable trend that aligns with China's requirements for building a new development pattern. SMEs capable of growing into global leaders in niche markets have the potential to make up for China's shortcomings in key areas and solve 'bottleneck' problems.
03 Development History
From the initial proposal of the 'specialized, refined, distinctive and innovative' concept to the comprehensive cultivation of specialized, refined, distinctive and innovative enterprises, the development of specialized, refined, distinctive and innovative enterprises in China has gone through more than a decade, mainly involving stages such as exploration, strategic layout, and full implementation.
Part2: Current Development Status of "Little Giants", a Specialized, Sophisticated and Innovative Enterprise
01 Number of Enterprises
China has cultivated five batches of specialized, refined, distinctive, and innovative 'little giant' enterprises. Currently, there are a total of 12,950 specialized, refined, distinctive, and innovative 'little giant' enterprises, and the cultivation of these enterprises has achieved remarkable results. In the future, driven by a series of policies, China will see a development boom for specialized, refined, distinctive, and innovative enterprises.
02 Industry Distribution
Specialized, refined, distinctive, and innovative 'Little Giants' enterprises are highly concentrated in industries such as computer, communication, and electronic equipment manufacturing, as well as specialized and general-purpose equipment manufacturing. This aligns with the current manufacturing industry's requirement for deep structural adjustment and industrial-driven upgrading.
03 Regional Distribution
At present, the regional distribution of specialized, refined, distinctive, and innovative (SRII) 'little giant' enterprises is affected by factors such as industrial foundation, showing a 'strong east and weak west' distribution pattern, mainly concentrated in regions with good industrial foundations such as the eastern and central regions. As of July 2023, five batches of SRII 'little giant' enterprises were distributed across 31 provinces in China, with 20 provinces having more than 100 'little giant' enterprises. The number of 'little giant' enterprises in Zhejiang, Guangdong, Shandong, and Jiangsu provinces leads the country, with more than a thousand 'little giant' enterprises.
04 Urban Distribution
In terms of urban distribution, specialized and innovative 'little giant' enterprises are located in 300 cities across China, with 13 cities boasting more than two hundred 'little giant' enterprises. Beijing, Shanghai, and Shenzhen lead the country in the number of specialized and innovative 'little giant' enterprises. Among the top 20 cities by the number of 'little giant' enterprises, there are 4 municipalities directly under the Central Government and 7 provincial capitals, while the other 9 cities are all from economically developed eastern regions.
05 Development Characteristics
"56789" is a development characteristic of small and medium-sized enterprises (SMEs) in China, as well as that of specialized, refined, distinctive and innovative (SRIIN) enterprises. It highlights the significant features of SRIIN enterprises at this stage from different aspects such as innovation capabilities, focus on niche markets, competitiveness of leading products, and growth cycles.
Part3 Analysis of Policies for Specialized and Innovative Enterprises
01 National Policies
In recent years, multiple central departments have emphasized 'specialization, refinement, uniqueness, and innovation' in relevant policy documents. Cultivating specialized, refined, unique, and innovative enterprises has been elevated to the level of national development strategy. National policies on cultivation mainly focus on financial support, R&D investment, and industrial digitization and intelligence.
02 Local Policies
To accelerate the cultivation of specialized, refined, distinctive, and innovative small and medium-sized enterprises (SMEs), under the guidance of national policies such as the 'Guiding Opinions on Promoting the Healthy Development of SMEs', various provinces and cities have successively introduced a series of reward and subsidy policies to promote the development of specialized, refined, distinctive, and innovative enterprises.
03 Financial Support
To address the difficulties, high costs, and slow financing faced by specialized, refined, distinctive, and innovative small and medium-sized enterprises (SMEs) during their development, national and local governments guide banks and financial institutions to jointly promote the financing development of these enterprises through financial means.
Part4 Analysis of Listed Companies with Specialties and Market Advantages
01 Number of listed companies
"Specialized, refined, distinctive, and innovative" (SRIIN) has caught the market's attention, and "little giant" enterprises have become a focal point of capital markets. As of August 2023, among all batches of SRIIN enterprises, there are 882 listed companies, with the number of listed companies in the first four batches continuously increasing.
02 Sectors and Market Capitalization
Most of the listed 'little giants' are small and medium-sized enterprises with good growth potential, and most are in leading positions within their respective industries. In the future, the Beijing Stock Exchange will gradually become the main venue for listed 'little giants' enterprises. In terms of sector distribution, 'little giant' listed enterprises are mainly concentrated in the ChiNext (327 companies) and Science and Technology Innovation Board (270 companies).
From the perspective of market value, most of the listed 'little giants' are small and medium-sized enterprises with a market value mainly concentrated below 10 billion yuan, among which the proportion between those with a market value of 0-5 billion yuan reaches 64%. Among the 882 listed 'little giants', only one enterprise has a market value exceeding 100 billion yuan. On the other hand, for 'little giant' enterprises with relatively lower market values, their growth potential is considerable, with most being leaders in their respective industries.
03 Industry Distribution
The industry distribution of listed 'Specialized, Expertized and Innovative' 'Little Giants' enterprises aligns with the ten key areas of the national strategy for strengthening the country. The listed enterprises are concentrated in industrial basic fields such as new-generation information technology industries and power equipment. Enterprises are carrying out industrialization research and development on key basic technologies and products around key industrial chains.
04 Urban Distribution
The number of listed 'specialized, refined, distinctive, and innovative' enterprises in cities is highly positively correlated with the degree of regional economic development to a certain extent. At the same time, the Yangtze River Delta region, as an area with a high number of listed 'little giants,' cannot do without its industrial clustering advantages and innovation capabilities.
05 Number of Patents
In recent years, driven by a series of policies, Chinese 'little giant' enterprises specialized in niche markets have achieved remarkable intellectual property results. The average number of patents held by the five batches of 'little giant' enterprises specialized in niche markets has remained at a relatively high level, indicating their strong innovation capabilities. On average, listed 'little giant' enterprises have about 152 patents per company, including 74 invention patents, 12 design patents, and 66 utility model patents.
Part 5 & Summary
01 Specialization, refinement, uniqueness and innovation are important measures for the high-quality development of small and medium-sized enterprises
The cultivation of specialized, refined, characteristic and innovative enterprises has gone through years of exploration, research and preliminary preparation. It has gradually evolved from a departmental policy into a national policy, which was then written into the report of the 20th National Congress of the Communist Party of China. At present, it has risen to an important level at the national strategic level. Cultivating specialized, refined, characteristic and innovative enterprises is an important measure for China to promote the high-quality development of small and medium-sized enterprises and boost the construction of a new development pattern with dual circulation. It is an inevitable requirement to help the real economy become stronger and better, and to enhance the stability and competitiveness of the industrial chain and supply chain.
Remarkable achievements have been made in cultivating specialized, refined and innovative enterprises
From the initial proposal of the concept of specialized, refined, distinctive and innovative enterprises to August 2023, China has cultivated five batches totaling 12,950 specialized, refined, distinctive and innovative 'little giant' enterprises. Remarkable achievements have been made in the cultivation of specialized, refined, distinctive and innovative enterprises, which benefits not only from continuous policy support at the national and local levels but also from the increasing number of market participants. The state and local governments encourage the recognition and application of specialized, refined, distinctive and innovative enterprises through various means such as certification subsidies and listing guidance. At the same time, with the popularization of the concept of specialized, refined, distinctive and innovative enterprises, more entities such as enterprises and financial institutions will participate in their cultivation to assist in their growth.
03 Capital market assistance for cultivating specialized, refined and innovative enterprises
The capital market has undertaken the important task of promoting technology-led industries and facilitating industrial upgrading. At present, China supports 'specialized, refined, distinctive, and innovative' small and medium-sized enterprises through multi-level capital markets, including important measures such as deepening the reform of the New Third Board and establishing the Beijing Stock Exchange. The core purpose of the establishment of the Beijing Stock Exchange is to serve specialized, refined, distinctive, and innovative small and medium-sized enterprises, aiming to provide more direct financing development opportunities for innovative SMEs to help solve the core problems of difficult and expensive financing for SMEs. As of August 2023, among all enterprises listed on the Beijing Stock Exchange, specialized, refined, distinctive, and innovative 'little giant' enterprises account for nearly 45%.
