China SME growth has declined for six years, due to government regulations, difficulty reaching new markets and distribution challenges. But the FinTech industry, growing rapidly within China and worldwide, may offer exciting solutions.
According to an article in the Jordan Times, China’s economy slowed for half of the past decade. Declining growth rates, transitioning from imitating to creating useful technology, and worsening city pollution levels contributed to the slowdown.
SME’s watch the national government’s inability to sustain growth and reform markets while hoping for improvement. On paper, China looks good showing 6.7% GDP growth. But due to China’s real estate overbuilding, a widening income gap and higher corporate debt are a drag on the overall economy.
China SME Growth Plan
The Ministry of Industry and Information Technology and the Bank of China developed a five-year plan to boost small and medium-sized business growth. This would encourage overseas mergers and joint ventures to bring technology imports to the mainland.
Reform is critically needed. From 2002 to early 2015, Chinese overseas business investments ranged from $100 million to $1 billion. Private enterprises grew seven times faster during 2014 and 2015 in contrast to the 2008-2013 recession period, according to the China Daily.
FinTech Expansion May Save China
Despite the lackluster 2016 second quarter fallback, when most countries experienced a FinTech investment plunge, a McKinsey report notes that China is experiencing fast financial technology growth. (Down the McKinsey report here.)
To avoid a slowdown, McKinsey noted that start-ups in this largest populated land may grow faster due to:
- Massive user base, consumer acceptance, and market size
- Mushrooming company valuations
- Cash infusions into the Internet finance industry, pushed into overdrive by $1.8 trillion, primarily in the payments arena
- Supportive Chinese regulation bodies
- Burgeoning e-commerce industry; 30% of the populace already buys online, especially from Alibaba
- Slow-moving companies, stymied by government regulation, leaving a lot of room for disruptive FinTech players
- Traditional banks aggressively funding innovative digital services
In an earlier post on OpenFinInc, we discussed the rapid FinTech explosion and fragmentation in Asia and worldwide.
Will FinTech impact China SME growth? If it doesn’t happen in the largest country on Earth, it won’t happen anywhere.