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Asia Times
5 days ago
- Business
- Asia Times
Taking the tech measure of China's 'Little Giants'
The 'sudden' success of China's DeepSeek has drawn global attention to the small and medium-sized enterprises (SME) ecosystem that Beijing is cultivating to find solutions to its domestic and external economic challenges. One of the key pillars of this ecosystem is its 'Little Giants' (小巨人) policy, which aims to cultivate specialized, sophisticated, distinctive and innovative SMEs involved in strategic technological sectors, such as artificial intelligence (AI), robotics, low-altitude economy, semiconductors, and more. This policy and the relevance of China's innovation SME sector have gained prominence since the beginning of the US-China trade war during the first Trump administration and the subsequent curbs on exports of key strategic materials and technologies to China. This also gave rise to Xi Jinping's ambitious techno-nationalism, wherein the emphasis was placed on import substitution by building globally competitive firms. At the same time, a domestic crackdown on big technological giants for various reasons created gaps in China's innovation sector that were expected to be filled by its SMEs. In this context, China's Ministry of Industry and Information Technology (MIIT) introduced the Little Giants policy in 2018 with the objective to build a network of innovative SMEs involved in strategic industries and support them through financial and other measures. As of December 2024, six batches of such Little Giants companies have been announced with a total of 14,600 SMEs qualified to receive special concessions, surpassing the 14th 5-year plan goal of creating 10,000 by 2025. However, despite the state support, these Little Giants are not insulated from structural problems in the Chinese and global economy, which may limit the effectiveness of this policy. Nonetheless, as the US-China economic competition is likely to continue in various forms, these Little Giants will play a critical role in determining whether China can sustain and strengthen its position in global supply chains in the long run. The criteria for designating Little Giants set by the MIIT ensured that only strategically important firms with the potential to strengthen domestic supply chains are selected. Besides sustained profitability and sound governance standards of SMEs, a critical emphasis is given to the innovative ability as well as the strategic positioning of firms in domestic supply chains. To be eligible for the Little Giants program, SMEs are required to invest at least 3% of their operating income specifically in R&D and must possess a minimum of five class I patents with visible monetary benefits. Thus, SMEs are being reoriented and incentivized to invest significantly in innovation as Chinese leaders link innovation to their survival, thereby securitizing the innovation sector. Moreover, Little Giants must hold a domestic market share of at least 10% in their niche sector and have the ability to 'fix weaknesses' in domestic supply chains. These specific criteria indicate that Little Giants are encouraged to operate predominantly in the domestic market, rather than targeting global markets, and gradually replace their dependency on Western countries by bolstering supply chains within China. In fact, the majority of Little Giants have become critical suppliers of key raw materials for bigger Chinese firms with global presence, and in some cases, even dominance. For instance, Little Giants like Xinjiang-based Hami CRRC New Energy Motor, which produces specialized wind turbine components and Hebei-based ONOFF Electric, which produces wind power converters, are both crucial partners of Xinjiang Goldwind Technology, one of the largest wind turbine producers globally. With similar examples in other strategic domains, Little Giants form an important foundation for China's global tech domination efforts by de-risking its upstream supply chains. Another important feature of the Little Giants initiative is the strengthening of industry-academia linkages at the local level. As witnessed throughout China's post-reform development, eastern provinces hold major sway in the Little Giants program as a significant number of these firms are based in coastal provinces. Besides the economic clout of these provinces, a strong network of universities, research institutions and tech firms has also enabled these provinces to expand innovation abilities. In addition, dedicated clusters like Wuhan Optics Valley district, Hefei High-tech Zone, and Nanjing Jiangning District have also significantly contributed to concentrating supply chains, with Little Giants playing an increasingly critical role in this evolving ecosystem. The Chinese government allocates 6 million yuan for selected Little Giants to be distributed over three years, along with other financial support from the State and state-backed institutions. Additionally, state backing for Little Giants is also expected to enable firms to raise money from stock exchanges and venture capitalists. In fact, the Beijing Stock Exchange was launched in 2021 with a specific focus on supporting SMEs. As a result, around 40% of initial public offerings (IPOs) launched on the Shenzhen, Shanghai and Beijing stock exchanges in 2022 were by Little Giant companies. However, the Chinese stock market has not performed well since the pandemic, prompting comprehensive capital reforms by Chinese authorities. Similarly, venture capital funding in China has been on decline since 2021, with the 2024 investments plummeting by 32% compared to the previous year. Deflationary pressure in China, coupled with geopolitical uncertainties, have also eroded investor confidence in Chinese companies. Both these factors have caused Little Giants to eventually rely more on state finances, as evidenced by the increase in investments by Chinese state-owned enterprises in strategic emerging industries over the past few years. With Xi Jinping increasingly aiming to promote nationalism across all sectors, Little Giants will not remain isolated from these efforts as their operations are more likely to be driven by state and Party directives than market trends. This Party-driven approach threatens to blur the line between private firms and state-controlled entities, as these Little Giants would prefer to follow State guidelines in order to avoid any crackdown, as witnessed by their bigger peers like Alibaba and Tencent in the past. If private investments fail to grow in the next few years, Little Giants would become more dependent on state subsidies, further reducing their capacity to innovate independently. Moreover, concerns surrounding overcapacity have plagued several strategic industries in China, particularly the renewable energy and electric vehicles sectors. The recent government work report presented by Premier Li Qiang also talked about the cut-throat competition between Chinese companies, resulting in profit squeezing. In this regard, Little Giants policy, along with similar initiatives like Single Champions, can be viewed as China's solution to prioritize few winner firms over others and thereby curb excess capacity. However, in light of rising unemployment and stagnant demand in China, the reorganization of its industrial structure that prioritizes SMEs, particularly in strategic industries that are being touted as 'new productive forces', may exacerbate these issues at least in the short term. Thus, Beijing faces the herculean task of promoting Little Giants while steering the economy through structural headwinds. Given the different criteria prescribed for eligible Little Giants, these firms are being nurtured to overcome shortcomings in domestic supply chains and become reliable partners for downstream Chinese companies with a global presence. However, these firms also hold the potential to become single and national champions in the long run if they are able to sustain global competition in their early stages, much like Little Giants. Yet, in the short term, these firms face the fear of losing business from their Western partners due to ambiguity about the State and Party's role in these firms. Further, although these firms have largely remained outside the West's sanctions mechanisms, the success of DeepSeek may also bring China's Little Giants under scrutiny. Similarly, the future path of the US-China trade war will also decide the fate of Little Giants in global markets, albeit these firms will aim to strengthen China's domestic supply chain resilience while navigating economic challenges. While the success of Little Giants is evident in individual sectors, the cumulative effect of these efforts in terms of de-risking Chinese supply chains will take years to materialize. Meanwhile, a careful assessment of the objectives and actions of these Little Giants will help to predict the next DeepSeek-like event and may avoid sudden shocks in an already unstable global economic environment. This article was originally published by the Organization for Research on China and Asia (ORCA) and is republished here with permission.
Business Times
5 days ago
- Automotive
- Business Times
China car trade-in subsidy halted in some areas as funds run low
[HONG KONG] China's trade-in subsidy to boost sales of electric and fuel-efficient vehicles has been suspended in key cities across at least six provinces as funds run short and officials scrutinise the prevalence of 'zero-mileage' used cars. Cities in provinces including Guangdong, Henan and Zhejiang have suspended the programme, which gives consumers up to 20,000 yuan (S$2,780) towards the purchase of a newer model car and had been scheduled to run until the end of this year, according to reports from local media including Dahe Daily. The practice of dealers and traders purchasing new cars in bulk, registering them in order to qualify for rebates, then selling them on the used-car market without ever being driven has added to fiscal pressures and led to probes by authorities, the reports said. Regulators are studying ways to prevent such practices and ensure proper fiscal allocations before continuing to support auto consumption, the Dahe Daily reported, citing people it did not identify. The cash-for-clunkers programme, part of a broader trade-in package aimed at boosting retail sales to support a weakening Chinese economy, has been an important pillar for the nation's car sales. About 70 per cent of personal car purchases in May utilised the trade-in subsidy, broadly in line with the figure for April, according to data from the China Passenger Car Association. The pause to the programme adds to growing challenges facing automakers in the world's largest car market. The industry has found itself under growing scrutiny after an extended price war caught the attention of authorities. That includes the Ministry of Industry and Information Technology which, along with two other agencies, convened a meeting with 17 major Chinese automakers in early June to address issues including 'zero-mileage' used cars, Bloomberg News has previously reported. 'These cars came under scrutiny as they're considered a tactic to fraudulently claim the subsidy,' Li Yanwei, an adviser to the China Automobile Dealers Association, said. Guangdong and Jiangsu provinces started to strengthen the verification of second-hand car sales in May, he said. Some provinces paused their subsidy programmes in June, and are re-assessing cars that have had multiple ownership transfers within a short period of time, according to Li. By the end of May, there had been more than 4.12 million applications for the vehicle trade-in subsidy, according to the Ministry of Commerce. BLOOMBERG
Mint
5 days ago
- Automotive
- Mint
China Car Trade-In Subsidy Halted in Some Areas as Funds Run Low
China's trade-in subsidy to boost sales of electric and fuel-efficient vehicles has been suspended in key cities across at least six provinces as funds run short and officials scrutinize the prevalence of 'zero-mileage' used cars. Cities in provinces including Guangdong, Henan and Zhejiang have suspended the program, which gives consumers up to 20,000 yuan toward the purchase of a newer model car and had been scheduled to run until the end of this year, according to reports from local media including Dahe Daily. The practice of dealers and traders purchasing new cars in bulk, registering them in order to qualify for rebates, then selling them on the used-car market without ever being driven has added to fiscal pressures and led to probes by authorities, the reports said. Regulators are studying ways to prevent such practices and ensure proper fiscal allocations before continuing to support auto consumption, the Dahe Daily reported, citing people it didn't identify. The cash-for-clunkers program, part of a broader trade-in package aimed at boosting retail sales to support a weakening Chinese economy, has been an important pillar for the nation's car sales. About 70% of personal car purchases in May utilized the trade-in subsidy, broadly in line with the figure for April, according to data from the China Passenger Car Association. The pause to the program adds to growing challenges facing automakers in the world's largest car market. The industry has found itself under growing scrutiny after an extended price war caught the attention of authorities. That includes the Ministry of Industry and Information Technology which, along with two other agencies, convened a meeting with 17 major Chinese automakers in early June to address issues including 'zero-mileage' used cars, Bloomberg News has previously reported. 'These cars came under scrutiny as they're considered a tactic to fraudulently claim the subsidy,' Li Yanwei, an adviser to the China Automobile Dealers Association, said in an interview. Guangdong and Jiangsu provinces started to strengthen the verification of second-hand car sales in May, he said. Some provinces paused their subsidy programs in June, and are re-assessing cars that have had multiple ownership transfers within a short period of time, according to Li. By the end of May, there had been more than 4.12 million applications for the vehicle trade-in subsidy, according to the Ministry of Commerce. This article was generated from an automated news agency feed without modifications to text.
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Business Standard
06-06-2025
- Automotive
- Business Standard
China urges BYD, EV rivals to end price war and avoid cost undercutting
Chinese officials summoned the heads of major electric vehicle makers, including BYD Co., to Beijing earlier this week to address concerns about the long-running price war, according to people familiar with the matter. The meeting was hosted by the Ministry of Industry and Information Technology, the market regulator and the top economic planning agency, said the people, who asked not to be identified discussing private information. The gathering was attended by senior executives from more than a dozen manufacturers that also included Zhejiang Geely Holding Group Co. and Xiaomi Corp., the people said. Officials told EV makers to 'self-regulate,' and that they shouldn't sell cars below cost or offer unreasonable price cuts. They also addressed issues such as 'zero-mileage' cars and mounting bills owed to suppliers that are squeezing cash flow along the supply chain and acting as quasi-debt financing for automakers, the people said. It's rare for China's market, industry, and economic regulators to jointly host a meeting with the car industry on operational matters like pricing. The move shows how much scrutiny the nation's top leadership is paying to the sector, amid concerns the price war is becoming unsustainable and could send weaker companies into bankruptcy. However, the gathering didn't result in a mandatory directive and it's not clear what consequences manufacturers would face if they don't follow the verbal warnings, the people said. BYD and Xiaomi didn't respond to requests for comments. A representative from Geely referred to a recent speech by Chairman Li Shufu who said the company resolutely rejects price wars and will compete on technology and its values. The Ministry of Industry and Information Technology, the State Administration for Market Regulation and the National Development & Reform Commission didn't reply to faxed questions. The Ministry of Commerce said during a routine briefing on Thursday that it will work with other departments to strengthen guidance for the auto industry, ensure fair competition and promote healthy development. Chinese automaker stocks were down across the board on Friday. Shares of BYD slipped by as much as 2.7 per cent while Xiaomi decreased 2.4 per cent. Geely Automobile Holdings Ltd. in Hong Kong fell 1.7 per cent. The warnings come after BYD kicked off the latest round in the price war late last month with discounts of as much as 34 per cent, leading to criticism from industry bodies and state media. Without naming BYD, the China Automobile Manufacturers Association released a statement saying the move by a certain company started a new round of 'price war panic' that was plunging the sector into a 'vicious cycle' and threatening supply chain security. 'Disorderly price wars intensify vicious competition, further compressing corporate profit margins,' the association said. Media outlets directly controlled by the Communist Party leadership including Xinhua, the People's Daily and state broadcaster CCTV have all published reports in recent days that called for automakers to stop discounting and restore order to the industry. Otherwise, this could lead to low-priced and low-quality products that will damage the international reputation and the image of 'Made-in-China,' the People's Daily said. This week's meeting marked the second time in recent days that industry leaders have been rebuked over 'zero-mileage' cars — a practice in which automakers that have failed to meet their sales targets offload new vehicles to supply chain financing companies or used car dealers. These essentially new cars then appear on the resale market with no mileage, while manufacturers record them as sales despite them not having reaching the end-consumer. The Ministry of Commerce also met with at least two major carmakers and online used cars platforms last week on the issue. Carmakers have been trying to pass on the hit from the price war to suppliers, demanding lower prices for parts and delaying bill payment by months. A price cut demand by BYD to one of its suppliers late last year attracted media coverage and scrutiny of how the EV behemoth may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research puts BYD's true net debt at closer to 323 billion yuan ($45 billion), compared with the 27.7 billion yuan officially on its books as of the end of June 2024, through delaying its payments to suppliers and other related financing. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Yahoo
05-06-2025
- Automotive
- Yahoo
China Warns BYD, Rivals to Self-Regulate on Price War Woes
(Bloomberg) -- Chinese officials summoned the heads of major electric vehicle makers, including BYD Co., to Beijing earlier this week to address concerns about the long-running price war, according to people familiar with the matter. ICE Moves to DNA-Test Families Targeted for Deportation with New Contract The Global Struggle to Build Safer Cars NYC Residents Want Safer Streets, Cheaper Housing, Survey Says The Buffalo Architect Fighting for Women in Design The meeting was hosted by the Ministry of Industry and Information Technology, the market regulator and the top economic planning agency, said the people, who asked not to be identified discussing private information. The gathering was attended by senior executives from more than a dozen manufacturers that also included Zhejiang Geely Holding Group Co. and Xiaomi Corp., the people said. Officials told EV makers to 'self-regulate,' and that they shouldn't sell cars below cost or offer unreasonable price cuts. They also addressed issues such as 'zero-mileage' cars and mounting bills owed to suppliers that are squeezing cash flow along the supply chain and acting as quasi-debt financing for automakers, the people said. It's rare for China's market, industry, and economic regulators to jointly host a meeting with the car industry on operational matters like pricing. The move shows how much scrutiny the nation's top leadership is paying to the sector, amid concerns the price war is becoming unsustainable and could send weaker companies into bankruptcy. However, the gathering didn't result in a mandatory directive and it's not clear what consequences manufacturers would face if they don't follow the verbal warnings, the people said. BYD and Xiaomi didn't respond to requests for comments. A representative from Geely referred to a recent speech by Chairman Li Shufu who said the company resolutely rejects price wars and will compete on technology and its values. The Ministry of Industry and Information Technology, the State Administration for Market Regulation and the National Development & Reform Commission didn't reply to faxed questions. The Ministry of Commerce said during a routine briefing on Thursday that it will work with other departments to strengthen guidance for the auto industry, ensure fair competition and promote healthy development. The warnings come after BYD kicked off the latest round in the price war late last month with discounts of as much as 34%, leading to criticism from industry bodies and state media. Without naming BYD, the China Automobile Manufacturers Association released a statement saying the move by a certain company started a new round of 'price war panic' that was plunging the sector into a 'vicious cycle' and threatening supply chain security. 'Disorderly price wars intensify vicious competition, further compressing corporate profit margins,' the association said. Media outlets directly controlled by the Communist Party leadership including Xinhua, the People's Daily and state broadcaster CCTV have all published reports in recent days that called for automakers to stop discounting and restore order to the industry. Otherwise, this could lead to low-priced and low-quality products that will damage the international reputation and the image of 'Made-in-China,' the People's Daily said. This week's meeting marked the second time in recent days that industry leaders have been rebuked over 'zero-mileage' cars — a practice in which automakers that have failed to meet their sales targets offload new vehicles to supply chain financing companies or used car dealers. These essentially new cars then appear on the resale market with no mileage, while manufacturers record them as sales despite them not having reaching the end-consumer. The Ministry of Commerce also met with at least two major carmakers and online used cars platforms last week on the issue. Carmakers have been trying to pass on the hit from the price war to suppliers, demanding lower prices for parts and delaying bill payment by months. A price cut demand by BYD to one of its suppliers late last year attracted media coverage and scrutiny of how the EV behemoth may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research puts BYD's true net debt at closer to 323 billion yuan ($45 billion), compared with the 27.7 billion yuan officially on its books as of the end of June 2024, through delaying its payments to suppliers and other related financing. (Updates with Ministry of Commerce statement in 6th paragraph.) Cavs Owner Dan Gilbert Wants to Donate His Billions—and Walk Again YouTube Is Swallowing TV Whole, and It's Coming for the Sitcom Millions of Americans Are Obsessed With This Japanese Barbecue Sauce Is Elon Musk's Political Capital Spent? 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