SMEs in China: Winter or spring?

For many SMEs in China, 2008 has proven a disastrous year. Thousands upon thousands closed for soaring costs of production, mainly in materials and labor. The declining needs of overseas market are accompanied by the continuous rise in RMB. All signs seem to tell one fact - winter is coming.

What to do to help the remaining SMEs survive the winter becomes high on the agendas of many local governments, especially in Guangdong, Zhejiang and Fujian, three southern coastal provinces now contributing the largest share of export volume. On the table, e-commerce is recognized as an effective vehicle for SMEs to migrate competitiveness to the Internet.

While e-commerce as a way to help explore overseas market is yet to be used by a fare portion of SMEs, domestic renowned business-to-business (B2B) companies Alibaba, GlobalSources and ECVV(www.ecvv.com) all say they will go through the winter with stuck SMEs.

On July 23, Jack Ma, CEO of Alibaba Group, composed an internal e-mail titled The Mission of Winter, calling up all his staff to get prepared for the winter. He opined that it was merely the start of an extremely long hard time.

Being cautious can't be mistaken, but seeing a chance encourages more. ECVV,an innovative B2B company prominent in the South China market, eyes opportunities. "ECVV is not alone out there. Like Alibaba, its future hinges on that of SMEs. The problem most SMEs are facing, that is, how to fit into the new demands of global market, is also our main concern when we're building marketing strategy. We will guide enterprises via our e-commerce platform and bring them more value with innovation, which is also our corporate culture." Steven Chen, CEO of ECVV, said.

According to a government report, during the first half year of 2008, 67,000 SMEs collapsed, most of which are export-oriented enterprises in Zhujiang and Yangtze River Delta areas. The growing costs of production (materials and labor), the declining needs of overseas market and the fast appreciation of RMB are the main causes. As these factors are escalating, local governments have to consider post-Olympic development and many choose e-commerce as a breakthrough.

Compared to traditional channels to promote products in overseas markets, e-commerce features lower costs, easier application and quicker return. Plugged to Internet, SMEs become unlimited to geography or demography. Recently, coordinated by Zhejiang government, its enterprises have been promised to gain full promotion across the Alibaba website, considered the global leader in e-commerce.

Four years younger than Alibaba, by the end of 2007, ECVV had already garnered one million registered companies and two million products. This June, the mayor of Shenzhen found ECVV and decided to offer operation guidance and special funds, hoping local enterprises could benefit form it eventually.

For ECVV, there is more than one way to do e-commerce. It has launched three other websites: jobs, trade shows, and industry news. The job website will fuel SMEs with trade professionals. Trade shows combine online and offline marketing into one. And industry news reflects the latest markets. Besides, ECVV's retailing B2C website ECVV(www.ecvvshopping.com has gone to market successfully, backed up by its main B2B site. Its aim is clear: the whole chain.

"I disagree it's a winter for ECVV. Though our growth slows down, compared to the rate of 300% two years ago, now 70%-100% for this half year, the market is still large. Only a fraction of SMEs are using e-commerce to explore overseas market. So challenges and opportunities coexist. Now we're ready." Steven said confidently.

About The Author-- Jasonlaochen: e-commerce researcher focus on China's b2b (Business-to-business) market.

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