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1、New Wave of Growth in ChinaInnovation through Developing SMEsMasterCard Worldwide Executive Summary After decades of unprecedented growth China now needs a new growth model based on innovation and higher value manufacturing and service.Focusing on the right areas to enhance its innovation ecosystem
2、will be important and SMEs may have to be at the center of this;SMEs arekey drivers of innovation in most countries.Countries like Germany have fully taken advantage of this SME strength,but China has significant work to do to address obstacles its SMEs face.There are several obstacles,but two are t
3、he focus of this paper:the lack of access to low-cost finance and the significant inefficiencies in their financial supply chain.While other issues,notably human capital and fair regulation and rules of law are of great importance too,we shall stay focused on the two financial ones we lay out above.
4、Based on this scope and our global assessment and Chinas position,we believe China could implement a number of measures to address the obstacles faced by SMEs including 1)Subject SOEs to market discipline 2)Develop an SME lending focus 3)Reform its interest rate regime and 4)Leverage innovative solu
5、tions to improve financial supply chain efficiency.1New Wave of Growth in China-Innovation through Developing SMEsMasterCard Worldwide New Wave of Growth in China-Innovation through Developing SMEs Chinas new wave of growth hinges on its ability to innovate Over the past 3 decades,China has succeede
6、d in rapid industrialization to become the worlds factory where the tasks of industrial production across most industries are being outsourced to China.This wave of growthin China has been driven by a global division of labor as the world has recognized Chinas comparative advantages including large-
7、scale labor,low costs,and relatively good infrastructure.Chinas entry into the WTO magnified this phenomenon by giving China unprecedented access to world markets,an opportunity that China seized well.However,this wave of grow this not sustainable at the same pace any more,as some of the premises of
8、 the success so far are changing.On the demand side,the world demand for manufactured goods made in China is not as robust and importers are looking for better and more creative products.On the supply side,Chinas low cost labor based comparative advantages are shrinking.Global manufacturers are find
9、ing low cost countrieslike Vietnam,Bangladesh and Africa more attractive.To remain globally competitive,China urgently needs to embark on a new wave of industrial growth driven by innovation rather than relative labor cost advantages.By innovation,we mean not just new products or technologies,but al
10、so continuous process and design improvements to established products such as automobiles or machine tools.Chinese leadership has made it clear that a new development model is required:a shift of focus to domestic consumption and higher value manufacturing and service figures prominently in the curr
11、ent five-year plan.2New Wave of Growth in China-Innovation through Developing SMEsMasterCard Worldwide Importance of SMEs in fostering innovation SMEs are one of the most important drivers of innovation in most countries.For example,in the US,among high patenting technology firms,SMEs produce 16 tim
12、es more patents per employee than large enterprises1.The“German Mittelstand”companies(Germanys SME segment)are some of the most innovative in Europe with 54%of them launching an innovation onto the market between 2008 and 20102.This should not be surprising because large established enterprises face
13、 the“innovators dilemma”where their profits depend on the stability of the very product markets that innovation always disrupts.SMEs on the other hand account for a disproportionately high share of real innovation because it is the only thing that makes them relevant to investors and customers.And t
14、his success at innovating does translate into economic growth.“Mittelstand”accounted for 52%of Germanys economic output in 2010;and whereas large firms cut jobs between 2008 and 2011(-2.4%),the Mittelstand increased employment by 1.6%2.In the US,SMEs accounted for 65%of net new job creation between
15、1993 and 20093.The impact on the overall economy is even greater because new jobs create more jobs,referred as the employment multiplier which for some industries like manufacturing could be close to 34.Research has also shown that SMEs with their local focus on employment and spending are better at
16、 boosting the overall domestic consumption.For example,spend with SMEs could have 2-3 times the impact on domestic spending compared to spend with large enterprises,known as the local multiplier effect5.Like other countries globally,in China SMEs have been the drivers of innovation accounting for 66
17、%of patents6.However,the issue in China is that when compared to SMEs in Germany and other global powerhouses,Chinas SMEs are not able to translate the intellectual capital to innovative products and services.Most of Chinas SMEs are focused on being suppliers to large companies or serving predictabl
18、e,stable industries(auto parts,packaging).For example,China produces a fraction of the“Hidden Champions”(Figure 1)Germany produces and also far less than US and Japan.“Hidden Champions”are highly successful small companies that are leaders in their niche market7.3New Wave of Growth in China-Innovati
19、on through Developing SMEsMasterCard WorldwideFigure 1:“Hidden Champion”in the International Comparison(2012)Source:Germanys,Federal Ministry of Economics and Technology(BMWi)Current Status:Chinas ecosystem supporting innovation will have to significantly improve To lead on innovation in the next wa
20、ve of growth will not be easy.In the 2012 Global Innovation Index developed by the World Intellectual Property Organization(WIPO)and INSEAD that ranks 140+countries in their ability to continuously innovate,China was ranked 34 which was significantly lower than US(10)and Germany(15).In particular,Ch
21、ina under-performs on the state of its ecosystem that supports innovation.On this element China was ranked 55.Other data suggests a big gap in Chinas ability to foster innovation:Fair and efficient access to capital for all participants Based on World Banks ease of getting credit index,China is rank
22、ed 70 compared to US which is 4 Human capital grounded in academic rigor and creativity Chinas education system as exemplified by the memorization heavy university entrance exam“Gao Kao”discourages entrepreneurship and creativity8.In contrast,the US education system strikes a good balance between kn
23、owledge based learning and creativity and has over half of worlds top 100 universities compared to 2 for China9 Fair regulation and rules of law that encourage market participation.China has significant ground to cover for example,Intellectual Property Rights Index10 ranks China 59th and US 4th 1307
24、3662208672930500100015004New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideAccess to capital is an area where SMEs are the most disadvantaged and is often a survival issue as well.We will focus on this issue in this paper.Lets examine the access to capital
25、in more detail A、Lack of Access to Low-Cost Financing They key reason behind SMEs difficulty in getting working capitalhas to do with banks that are in the business of providing working capital and how they function.With large enterprises,banks feel comfortable providing working capital because thes
26、e firms have substantial capital,an earnings track record or state guarantees to protect them from loss.This logic also dissuades banks everywhere from lending to SMEs which typically lack sufficient history and stability of earnings.Since working capital is a survival issue,SMEs are forced to turn
27、to expensive finance companies along with grey lending by so-called“shadow banks”.The situation in China is no different.Only the most qualified SMEs can get loans from banks,hence SMEs account for only 20-25%of bank loans despite driving a much higher share of GDP6.In addition,the interest rates fo
28、r loans to SMEs in China are significantly higher than those to large corporations.For example,SME loan interest rates by banks were estimated to be about two times of the rates enjoyed by large corporations(i.e.,rates for SMEs were often 20%-50%over the benchmark rates set by PBOC,while the large c
29、orporations may receive up to 30%discount off the benchmark rates)11.Many SMEs cannot obtain bank financing even at such rates,and have to seek out so-called“social lending”that carries much higher rates.Bank financing issues for SMEs in China are magnified by the state-owned enterprises(SOE)dominan
30、ce in Chinas economy.Chinas large banks have little incentive to serve SMEs because they can easily earn very good profits by only serving the SOE customers.Many SOEs are large in size and operate in protected industries;hence loans to them possess many advantages over SME loans in terms of large lo
31、an size,lower risk,and ability to provide sizable deposits.These advantages,combined with a guaranteed healthy interest margin via thetightly regulated deposit rate cap and lending rate floor under the current interest rate regime in China,make lending to large SOEs very attractive financially.In fa
32、ct,all banks need to do is to balloon their loan sizes to make more money.This is made worse by the“life-long loan responsibility”policy at state-owned banks.This policy,designed to reduce lending risks by holding the lending department staff responsible for the life-long performance of a loan,has t
33、he unintended side effect of staff becoming overly concerned with lending to SMEs for fear of loan defaults that threat their job security,even if they can charge higher interest rates to compensate for the higher expected losses.Instead,the lending department staff often finds comfort in lending to
34、 those large state-owned enterprises that are considered implicitly guaranteed by the government,so that they can avoid the severe penalty of loan defaults under that policy.This is an unfortunate issue limiting SME access to bank loans because state-owned banks dominate Chinas banking 5New Wave of
35、Growth in China-Innovation through Developing SMEsMasterCard Worldwideindustry with over 70%in assets12.Till now,Chinas banks have not developed sufficient tools and capabilities to profitably and supportively lend to SMEs.B、Significant inefficiencies in the financial supply chain The other reasonth
36、at makes working capital financing issues worse for SMEs is the significant inefficiencies in their financial supply chain,specifically their procure-to-pay processes.And given the important role SMEs play in cross border trade including in China,cross border financial supply chain inefficiencies ar
37、e equally important as domestic supply chain inefficiencies.The roots of the inefficiencies in the domestic and cross border payment systems are small businessesscale and cost structure that make SMEs unable to benefit from the traditional electronic payments.The result is higher working capital req
38、uirements for SMEs because of the lower velocity of capital through the supply chain.The other impact is higher operations costs for SMEs to support their financial supply chain that puts them at a significant competitive disadvantage compared to large enterprises.To understand these inefficiencies,
39、it is important to understand the key process drivers and the role of electronic payments in reducing the costs and lengths of those processes.Interestingly,bulk of the process activities are non-payment related.For example,86%of costs related to a check transaction in US are for non-payment related
40、 activities like approvals and reconciliation13 and are likely to be smaller(thereby making the process faster)for electronic payment methods that lend themselves better to automation compared to paper based payments like checks and cash.Unfortunately for SMEs,their scale and cost structure make the
41、 traditional and broadly available electronic payment methods like ACH and credit transfer less feasible for them,leading to not only higher costs but also slower procure-to-pay processes than large enterprises.For example,penetration of electronic payments in SMEs in the US market is significantly
42、lower at around 30%of dollar value compared to a 60%penetration for all businesses14.Additionally,based on research conducted by CFO Research services these inefficiencies were mentioned in the top 5 concerns by finance professionals15 SMEs are urgently in need of new electronic payment means that s
43、erve their unique needs well.The problems in the financial supply chain are magnified in the case of cross border payments that are much more complex and involve the coordination of value chain participants and systems across national boundaries.A lack of alignment with the global open payment stand
44、ards like in China further aggravates the issue because of the greater need for integration between domestic payment systems and international systems and the requirement to participate in disparate payment systems.Mobile payment in Japan is a case in point.Although Japan led the world initially on
45、contactless and mobile contactless payment implementations,its FeliCa technology failed to join the ISO standards later.The end result was that Japans standards are not compatible 6New Wave of Growth in China-Innovation through Developing SMEsMasterCard Worldwidewith the rest of the world,and Japans
46、 FeliCa standard operators are now looking for ways to support open loop standards and move away from FeliCa and migrate to international standards(ISO 14443)for seeking cost effectiveness and global compatibility.Recently,NTT DoCoMo,one of Japans largest telecom operators,announced to partner with
47、MasterCard to bring the FeliCa based mobile wallets solution to be open-standard based14.Cross-border payment is just one example of how open standards could benefit SMEs.ISO has repeatedly argued that open standards support SME development,because compliance with such standards help SMEs compete on
48、 a level playing field with bigger enterprises and open up the export markets14.Way Forward How should China address the issues of SME financing and supply chain efficiency head on?We studied a number of banking and technology cases globally and found encouraging successes.We believe that there are
49、4 key imperatives for China.1、Remove the significant structural advantages of SOEs over SMEs As discussed,SOEs magnify the obstacles for SMEs to access financing in China.China could benefit from removing the significant structural advantages of SOEs and supporting private companies by creating a mo
50、re level playing field.There are several examples of countries that have made this transition without resulting in political instability.For example,prior to 1980,the UK possessed one of the largest SOE sectors in Europe,but in the 80s embarked on an extensive privatization program16.The result,empl
51、oyment in UKs public sector dropped from around 8%of UKs employment in 1979 to less than 2%in mid 1990 s16.There are two lessons to be learned from how UK achieved its privatization goals and countries throughout Europe,from France to Germany and the former communist states of Eastern Europe copied
52、the UK model16.The first lesson is that UK used a phased approach starting with smaller enterprises such as housing that also operated in private markets and then moving to the large,more complex monopolistic enterprises like public utilities.The second lesson was that UK used a two pronged approach
53、 for privatization that included a)selling(full enterprise or shares)to the private sector and b)subjecting the SOEs to the same market discipline as private enterprises.China has made some significant progress in reducing the role of SOEs,but that is not enough.SOEs still account for close to 30%of
54、 GDP17 which although significantly lower than the 90%share in the 1970s18 is still higher than the developed countries(UKs SOE contribution to GDP was about 10%before its privatization program16).7New Wave of Growth in China-Innovation through Developing SMEsMasterCard Worldwide2、Developing an SME-
55、lending focus As discussed earlier,SMEs are often not well served by banks.A caveat to this point is that a small/local banking model lends itself better to SME lending as compared to a large bank dominated banking system.For example,in US small and mid-sized banks account for 20%of bank assets but
56、54%of small business lending19.Even in China,loans to SMEs are only 10%of large banks portfolio compared to 20%for small banks6.The reason for this behavior is that small,local banks,unable to compete in serving large corporations due to limitations in footprint and scale,have to focus on building r
57、elationships and tools locally to serve SMEs.Overtime,such local banks have been able to overcome the inherent challenges in servingSMEs.Perhaps the best example of success is the“Mittelstand”,Germanys vibrant SME segment.It is considered the most innovative SME segment globally producing nearly fou
58、r times the number of champions compared to its closest rival US2.In fact it is these firms rather than the traditional German national champions like Daimler,Siemens and other large enterprises that have powered Germanys new wave growth.Today“Mittelstand”accounts for over 60%German employment and o
59、ver 50%of its economic output2 and is 2-3 times more profitable than the large German enterprises20.Besides their own equity money,the true Mittelstand companies have historically gotten the working capital they needed to expand their operations and launch innovative new products from the hundreds o
60、f local savings and cooperative banks(Figure 2)that make up over two thirds of all financial industry assets in Germany21.Figure 2:Source of External Finance for the Mittelstand Note:“Other”includes alternative forms of financing including mezzanine or venture capital Source:Germanys Federal Ministr
61、y of Economics and Technology(BMWi);MasterCard Analysis 4543562151511160%10%20%30%40%50%60%70%80%90%100%200520062007200820092010OtherStateAidsNationalBankLoansLocalBankLoans8New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideFrance is a
62、n example of a country that has long neglected the importance of SMEs and their financing requirements and is just realizing its mistake.For historical reasons bank finance has always been largely closed off to SMEs in a highly concentrated banking system with strong ties to national champions and t
63、he state.It took France until 2008 to come up with its own term for Mittelstand:“Entreprises de taille intermediaire”22.But the success of the Mittelstand has motivated France to transform its own SME segment to boost its growth as the euro crisis chips away at the success and confidence of the larg
64、e national champions22.Recently Hollandes government announced a new bank called Banque Publique d Investissement(BPI)to steer public and private capital into SMEs22.Economies are well served when they have the right mix of global banks,large national banks and smaller regional/local banks to create
65、 efficiency in financing.Because large banks dominate Chinas banking landscape,elevating their performance in serving SMEs is also important.Although not easy,this can be achieved.A notable example is JP Morgan Chase that enhanced its local banking capabilities in the US,including hiring more small
66、business bankers,leading to over$20.2 billion in new credit to small businesses during 2012,an 18 percent increase over 201123,24 3、Reform Interest Rate Regime China should continue to carefully reform its interest rate regime to let the market forces set equilibrium interest rates by risk profiles.
67、The resulting drop in the lending margin to large corporations will motivate Chinas banks to increase focus on SME lending in order to preserve good interest margin.Of course,interest rate reform is not without risk and regulators and banks need to prepare carefully:The key task of bank regulators i
68、s to set appropriate standards of bank capabilities,not just financial ratios,and see they are achieved and maintained by individual banks through capability audits Banks must get ahead of the curve in building pricing and risk management capabilities to operate safely and profitably in a liberalize
69、d interest rate environment before the gradual process of reform gets ahead of them 4、Develop Electronic Payment Innovations that Meet SMEs Unique Needs SMEs financial supply chainhardly benefits from the traditional electronic payments such as ACH and credit transfer.There is a need to create elect
70、ronic payment systems in the areas of trade finance,T&E and purchasing as well as supply chain finance.SMEs that have access to electronic payment innovations are able to improve efficiency and margins.A recent study of 50 US suppliers which included many SMEs showed that commercial card acceptance
71、enabled an order-to-cash cycle that is 10 times or 34 days shorter than that of Checks,ACH,and Wire transfer,resulting in significant improvements in working capital requirements for the suppliers25.9New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideAnother example of
72、 SMEs benefiting from global payments networks infrastructure takes place in the e-commerce space.Chinese SMEs who sell through AliE now can easily accept international credit card payments of overseas buyers,who are often SMEs themselves.If not for this solution,the traditional trade finance produc
73、ts like Letter of Credit would be expensive and slow for the small quantities of goods sold through AliE.SMEs in the travel industry have benefited from recent payment innovations.For example,eNett provides an innovative payment solution to small travel agencies who need to pay hotels and other trav
74、el suppliers.It uses a MasterCard technology that dynamically generates virtual card numbers to substitute for vouchers and transfers through checks or other expensive means.So,once a travel agency requests for a hotel room in a small hotel overseas,the payment is sent to the small hotel by a virtua
75、l card,and the hotel would have immediate access to the funds on confirmation.On the other hand,the travel agent is able to streamline the payment overseas without a complicated billing,exchange conversion,reconciliation,and payment process.This makes the process for the small travel agency and the
76、small hotel far more efficient and faster.Finally,electronic payments provide better information that is critical for prudent SME lending.Innovative payment players like Alibaba have leveraged their payments infrastructure to successfully expand into SME lending.By controlling credit risk through vi
77、sibility on SME sales information,Alibabas SME financing business has grown rapidly,and is well-received by its SME customers26 Summary To ensure high growth rates,China needs to foster innovation in the economy.Our analysis shows that having SMEs drive innovation in the economy is very efficient.Th
78、e biggest obstacle to SMEs ability to support innovation is access to financing.China needs to tackle 4 key issues in reducing the financing obstacles for its SMEs:1.Create ground rules and discipline for large SOE financing that starves SMEs of market demand and bank financing 2.Build an SME bankin
79、g focus by beefing up small local banks and by improving SME banking capabilities and motivations of large banks 3.Reform the currentinterest rate regime that guarantees healthy interest margin making lending to large SOEs very attractive financially for banks 4.Enable electronic payment innovations
80、 toreduce significant inefficiencies in the financial supply chain that are magnified for cross border trade Based on global benchmarks,we recommend that China adopt a number of measures to help remove the obstacles China SMEs face.These recommendations will improve access to working capital and fin
81、ancial supply chain efficiency for SMEs.10New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideSources:1.An Analysis of Small Business Patents by Industry and Firm Size(2002-2006)by US Small Business Administration,Office of Advocacy,(2008)2.Germanys,Federal Ministry of
82、Economics and Technology(BMWi)3.Analysis of Small Business and Jobs by US Small Business Administration,Office of Advocacy,(2010)4.Economic Policy Institute,US 5.Institute for Local Self-Reliance 6.Chinese Academy of Social Sciences and China Association of Microfinance 7.Wikipedia 8.MasterCard Advi
83、sors Analysis and National Journal 9.Times Higher Education World University Rankings 2012-2013 10.Property Rights Alliance 11.China Economy Website 12.National Bureau of Economic Research 13.Purchasing Card Benchmark Survey,RPMG Research 2010 14.MasterCard Advisors Analysis,2011 and 2012 15.CFO Res
84、earch Services,2012 16.Institute for Development Policy and Management,University of Manchester 17.Harvard Business School Research,2012 18.Chinas National Bureau of Statistics 19.US Federal Deposit Insurance Corporation(FDIC)20.Diagnose Mittelstand 2012,Deutscher Sparkassenund Giroverband 21.German
85、 Bankers Association,www.germanbanks.org 22.The Economist,Oct 2012 23.JP Morgan Chase Plans Continued Support for Sound Lending and Regulatory Reform,JP Morgan News Release 24.Chase Tops$20 Billion in 2012 Small Business Loans,JP Morgan News Release 25.MasterCard and Kaiser Associates,Commercial Car
86、d Acceptance Cost-Benefit Study,2012 26.Securities Times China 11New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideAppendices New Wave of Growth in China Innovation through developing SMEs PART 1:INNOVATION-RELATED INDICES AND RANKINGS Global Innovation Index 2012(Exc
87、erpts)Country/Economy Innovation Score(0-100)Innovation Rank Switzerland 68.2 1 Sweden 64.8 2 Singapore 63.5 3 Finland 61.8 4 United Kingdom 61.2 5 United States 57.7 10 Germany 56.2 15 China 45.4 34 Russia 37.9 51 Brazil 36.6 58 Source:Global Innovation Index 2012,World Intellectual Property Organi
88、zation&INSEAD 12Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideEase of Getting Credit Index(Excerpts)Country/Economy 2011 Ranking 2012 Ranking Singapore 1 1 United States 4 4 United Kingdom 6 7 Korea,Rep.9 8 Germany 18 20 Japan 20 24 France 32 34 China 9
89、1 91 Russian 118 112 Brazil 128 130 Source:Doing Business2013,World Bank Intellectual Property Rights Index 2012(Excerpts)Country/Economy Ranking IPR Score Finland 1 8.6 Japan 4 8.3 United States 4 8.3 United Kingdom 9 8.2 Germany 11 8.1 France 17 7.9 Korea,Rep.27 6.8 Brazil 53 5.5 China 59 5.2 Russ
90、ia 79 4.8 Source:Property Rights Alliance 13Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideTop 100 World University Ranking 2012-2013(Excerpts)Rank Institution County/Region Overall Score 1 California Institute of Technology United States 95.5 2 Stanford
91、 University United States 93.7 2 University of Oxford United Kingdom 93.7 4 Harvard University United States 93.6 5 Massachusetts Institute of Technology United States 93.1 6 Princeton University United States 92.7 7 University of Cambridge United Kingdom 92.6 8 Imperial College London United Kingdo
92、m 90.6 9 University of California,Berkeley United States 90.5 10 University of Chicago United States 90.4 12 Swiss Federal Institute of Technology Zurich Switzerland 87.8 27 University of Tokyo Japan 78.3 42 Karolinska Institute Sweden 72.4 46 Peking University China 70.7 48 Ludwig-Maximilians-Unive
93、rsitatMunchenGermany 70.4 50 Pohang University of Science and Technology Korea 69.4 52 Tsinghua University China 67.1 54 Kyoto University Japan 66.8 59 EcoleNormaleSuperieure France 65.9 Source:The Times Higher Education,World University Ranking2012-2013,Thomson Reuters 14Appendices New Wave of Grow
94、th in China-Innovation through Developing SMEsMasterCard WorldwidePART 2:KEY CHALLENGES FOR SMES A.Access to Finance SME loan share of total business loan SME loan share of total business loans,1 2007-10 as a percentage of total business loans Country 2007 2008 2009 2010 Canada 17 16 18 18 Chile 17
95、15 18 18 Denmark 12 9 9 11 Finland 27 22 20 14 France 26 26 26 26 Hungary 59 58 58 60 Italy 19 18 18 19 Korea 87 83 84 81 Portugal 78 78 78 77 Slovak Republic 63 74 76-Slovenia 57 56 55 50 Sweden 89 89 92-Switzerland 81-Thailand 28 27 27 38 United Kingdom 11 11 12 12 United States 30 28 28 29 Note:1
96、.Definitions differ across countries.Source:Financing SMEs and Entrepreneurs,OECD Scorecard(2012)15Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideInterest rates in France 2007-2011 Interest rates in France,2007-10 by size of firm,as a percentage Source:F
97、inancing SMEs and Entrepreneurs,OECD Scorecard(2012)01234567Jan07Jul07Jan08Jul08Jan09Jul09Jan10Jul10Jan11LargefirmsSMEsinagroupIndependantSMEsincludingmicroenterprises16Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideB.Supply Chain Inefficiencies Concerns
98、 of US Finance Professional Note:Respondents were asked to choose up to four barriers Source:CFO Research Services,2012 6%11%11%11%40%32%34%34%29%29%20%20%What stand in the way of cash and working-capital improvement at small and midsize companies?OtherLack of access to financing/Constriction in cre
99、dit marketsLack of acess to cost-effective products and services to support cash and working-capital Weak credit rating after recent financial Difficulty selling excess inventoryOrganizational fatigueProcess weaknessInadequate technology systemsInternal pressure to accept less favorable terms to clo
100、se slaesLack of coordinated effort to support collections and payment performance Lack of bargaining powerLack of shared organizational mandate to improve cash and working capital management A lack of bargaining power,combined with internal problems with coordination and allignment,surface as the mo
101、st prominent obstables.17Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideProcure to PSource:201 US Business Source:Mas Pay Process I0 Purchasing s Payments UsterCard Advi0%20%40%60%80%100%Inefficiencies Card BenchmUsage(Percenisors Analysis Small Business
102、e(US Examplemark Survey,Rntage of Dollas,2011 and 20esMediumBusinessee)RPMG Researar Value)012 m esTotal Business rch sCashCardEFTChec hdscks18Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwidePART 3:GLOBAL EXAMPLES OF TACKLING SME CHALLENGES A.German Mitte
103、lstand Case Study and Its Supportive Local Banking Environment Performance of the German Mittelstand Source:Diagnose Mittelstand 2012,Deutscher Sparkassenund Giroverband 6.311.210.811.95.112.111.013.35.713.111.714.8051015 50 million Large-scale companies0 to 50 million SMEs1 to 50 million Medium-siz
104、ed enterpries0 to 1 million Small enterprisesReturn on Assets,2008 to 2010median values,as percentage,by turnover volume category2008200920102.26.04.211.61.56.84.211.11.56.64.210.532712 50 million Large-scale companies0 to 50 million SMEs1 to 50 million Medium-sized enterpries0 to 1 million Small en
105、terprisesReturn on Sales,2008 to 2010median values,as percentage,by turnover volume category20082009201019Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideInnovation Edge of German Mittelstand Source:Germanys,Federal Ministry of Economics and Technology(BM
106、Wi)Germanys Local Banking Model Source:German Bankers Association,www.germanbanks.org 543400GermanyEUInnovative SMEsFigures for 2010 in%Commercial Banks,27%Landesbanks,14%Savings Banks,20%Credit Cooperatives,12%Mortgage Banks,16%Special Purpose Banks,4%Building and Loan Assocations,7%Shar
107、e of Loans to non-MFIs20Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideB.Banking Models In US and France U.S.Bank Assets and Share of Small Business Lending 2012 Source:Institute for Local Self-Reliance,2012 Small&Mid-Sized Banks,21%Giant Banks,60%Large
108、Banks,20%Share of Bank AssetsSmall&Mid-Sized Banks,54%Giant Banks,27%Large Banks,19%Share of Small Business Lending21Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideFrances Banking Concentration Note:With France being a heavily branch-banking country,the
109、number of branches is representative of the penetration of various banks into the local markets.Source:RBR;MasterCard Analysis Credit Agricole,23%CaissesdE pargne,15%Credit Mutuel,11%Banques Populaires,10%Societe Generale,8%BNP Paribas,8%CIC,7%LCL,7%HSBC,3%Creidt du Nord,2%Other,6%Share of Branches
110、by Bank22Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideFrench bank deposit share Source:World Retail Bank Report 2009;MasterCard Analysis China Banking Landscape Assets held by state-controlled banks and other banks in China,2009 Assets Tril.RMB Share P
111、olicy banks 6.95 8.6%State-owned commercial banks 39.04 48.5%Joint stock commercial banks with state as largest shareholder12.59 15.6%State-owned or controlled banks 58.58 72.7%Other commercial banks and credit unions 16.36 20.3%Postal savings bank 2.70 3.4%Non-bank institutions 1.55 1.9%Foreign ban
112、ks 1.35 1.7%Others 21.96 27.3%Total 80.53 100.0%Source:An Analysis of Stateowned Enterprises and State Capitalism in China,Andrew Szamosszegi and Cole Kyle 21%100%18%14%10%9%5%3%3%20%0%10%20%30%40%50%60%70%80%90%100%Caisse dEspargneLCL Societe GeneraleCredit MutuelCIC La Banque PostaleBNP ParibasCre
113、dit AgricoleBanques PopulairesCCF/HSBCOtherTotal French Bank Deposit Share(%market share of total deposits)72%23Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard WorldwideC.Payment Innovations That Supports SME US Card network growth 2010 Source:Ernst&Young 2010;Mas
114、terCard Analysis Commercial Card Network Solutions Projected GDV Growth(2010-2015)Source:Glenbrook Commercial Card Sizing Aug 2011,EIU Forecasts Oct 2011,MasterCard Analysis 2012 -15%-10%-5%0%5%10%15%20%CheckACHWireCard Network2010 Revenue Growth Rate(US)0%10%20%30%40%CommericalCardGDPGrowth24Appendices New Wave of Growth in China-Innovation through Developing SMEsMasterCard Worldwide