Transcript PowerPoint Template

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Developing SMEs Services:
Opportunities and Challenges in China
Dr Jason Chen, Ascenda CPAs
Session 5 IFAC SMP Forum
October 28 2009
Beijing China
Outline
Role
of
SMEs in China’s Economy
SMPs in China
SME Service Opportunities for SMPs
Challenges for SMPs
Looking Ahead
Role of SMEs in China’s Economy

Approximately 9.7million SMEs (2008)
–

98 per cent of the total registered business
entities
Contributions by SMEs to national economy (2008)
–
–
–
–
–
60% of GDP
Taxes: 50%
Exports: 78%
Innovations (e.g. patent): 66%
Employment: 75%
Data source: China Association of Small and Medium Enterprises
Status of SMPs in China’s CPA
Profession

CPAs in China (in the year of 2008)
–
–
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
Total fee revenue: 31 billion RMB
Practicing CPAs: 83,252
Number of CPA firms: 7,143
Top 80 firms
–
–
–
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a firm with an annual fee revenue of 40 million
RMB and plus
Total fee revenue: 18.6 billion RMB
60 per cent of the total
Revenue per firm: 233 million RMB
Data source: CICPA
Status of SMPs in China’s CPA
Profession

SMPs Defined:
–

Firms with an annual
fee revenue of less
than 40 billion RMB
(“Non-top 80”)
SM Ps
40%
L ocal T op 8 0
30%
Revenue of SMPs
–
–
–
Total fee revenue:
12.4 billion RMB
40 per cent of the
total
Revenue per firm: 1.76
million RMB
B ig 4 s
30%
Fee Revenue in 2008
Service Opportunities from SMEs

Features of SMEs in China
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Business goals and strategies

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Management and internal controls

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e.g. more than two sets of accounts
Financing difficulties


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“Making money whatever or wherever it is”
e.g. only 22% bank loans granted to SMEs
e.g. of the total direct financing, only 3% to SMEs
Human resources

Lack of well-trained managers
Service Opportunities from SMEs

Service Demands by SMEs
–
Bookkeeping and secretarial services
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Tax Advisory services


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Managerial consulting

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Tax agent, i.e. preparing and filing returns
Tax planning and advising
Internal control
Performance evaluation and remuneration
IT systems
Financial and investment consultation


Introducing PEs
Advice on buying & selling business
Service Opportunities from SMEs

Opportunities for SME Services are
TREMENDOUS!
Challenges for SMPs

But most SMPs in China
JUST LET THEM GO……
Challenges for SMPs

Break-down of SMPs Services in China
80%
70%
60%
50%
40%
30%
20%
10%
0%
A u d itin g
C a p ita l V e rfic a tio n
A s s e t a p p ra is a l
C o u s u ltin g
T a x a gen t
T ra in in g
O th e rs
Challenges for SMPs

A further analysis on
SMPs service focus
–
Assurance and compliance:
89.57%
–
Consulting and other
non-assurance: 10.43%
Notes: asset appraisal excluded
Assurance and compliance
consulting and other non-assurance
Challenges for SMPs

Operational problems with SMPs in China
–
Lack of clear market positioning
–
Majority of services originating from non-market
forces

Governmental permissions vs. practising certificates
–
Lack of services differentiation results in lowprice competition
–
Failure to attract qualified professionals
–
Low technical capacity results in poor service
quality
Non-differentiation
of services
Low-price
competition
Low technical
capacity
Cycle of SMP
Operation
Dilemma
Financial
constraints
Lack of
professionals
Challenges for SMPs

SMPs: How will you get PREPARED?
Looking Ahead

Changes in business mindset
–
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
Be professionals, not just “money-makers”
Be market-oriented and on long-term development
Market positioning
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Developing core competence
Differentiation strategy
Foster or “cultivate” demands from SMEs
Alliance with other firms to grow
Looking Ahead (cont’)

Creativity and differentiation of services
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Do what others cannot
Outsourcing market & consulting business
– Be specialist in segmented markets
– Develop branding in certain regions and in certain industries
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
Developing information technology
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
Research and develop computerized systems for SMEs
Developing people resources
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Adopting team-working practice and offering help with career
development
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