Allstate Journal

Ye Tan: Corporates Need No Tax Reduction and Care What Do Entrepreneurs Need Indeed?

Article/Ye Tan

In November, 2016, when I visited several companies in Suzhou, the entrepreneurs there gave some precious voices to which the entire society should listen.

Recently theorists are discussing if government should reduce tax, should lower exchange rate, and should give more care to companies so as to make them pass through the transition difficulty.

The thinking of front-line entrepreneurs must be considered to know what they really need.

When I conducted research into those companies, I found the fact that it is contrary to what I thought in my study room. The truth is that companies aren’t be bound up in asking for tax reduction or special protect but stable policy expectation, efficient service and the well-functioning protect on innovative and honest corporates.

The result may have something to with the surveyed companies themselves, of which are either leading in industry or superiorly innovative. After earning the first pocket of gold, such companies hope to become a century-old big name through natural selection.

1.GoodBaby: tax reduction isn’t important thing

Goodbaby is founded in 1989. Now two of three buggies in Europe and America are produced by the Goodbaby Group.
Goodbaby introduced the fund and completed the adjustment on ownership structure in 2008, and was list in 2010. It had no worry about its ownership unlike the Vanke and can enter the international market through its internationalized personnel. A healthy and sturdy ownership structure is of great significance for a company which just obtained first bucket of gold.

To keep the vantage, company made several changes which resonates with transition in manufacturing in recent years.
First is innovation. Goodbaby has eight R&D centers in cities like Boston, Bayreuth and Dongguan. Over 400 employees work in these centers.

In 2014, company casted eyes on European and North American markets and made two important acquisitions. In January, 2014, Goodbaby bought out issued capital stock of Columbus Holding, a Germany famous children’s product company. At the same year, all issued capital stock of WP Evenflo was purchased to enlarge the manufacturing business in North America and shorten the delivery cycle and lower the risk of increase on cross-ocean freight cost.

Although the turnover of WP Evenflo is 1.612 billion HDK, a year-on-year decrease of 4.9%, synergistic effect has taken place judging by the latest data. In 2015, Goodbaby’ s net profit in global market reached 197.434 million HDK from 57.475 million HDK last year, an increase of 243.51%.

The gene of this company has changed, from domestic company to international one. Innovation doesn’t mean isolating yourself from the rest of the world and seeking award at home but means quantifying the indexes which can reflect the sales in each region across world and the profit rate of each products.

Second is three times’ transformations. I find even every industry walks on different paths but they will end up in same destination. After several times transformations, the destination is service-chain.

Goodbaby transformed from producing durable goods to consumer goods, later to service products. Goodbaby remains committed to building up service platform and developing service tracking system.

Every family, starting from mother just bearing the child to the child gradually becoming infant and teenager, requires various services. Some billion dollars can be ceiling of manufacturing while prospect in service industry is enormous. When traditional manufacturing is stranded in trouble, transformed companies are enjoying the unique landscape.

After young parents have children, the baby-sitter, the soft materials that can cover on the edge of every furniture in case of baby tumbling, the crib and the service life baby carriage can be huge challenge for them, which requests the companies in the field of infant products to provide a safe and reliable service chain.

The business opportunities are boundless. Teenager’s foot get bigger every day and their foot shapes differ from the adult’s. In our time when all materials were scarce, parents bought much bigger shoes and otherwise we worn brothers’ and sisters’ shoes. That’s not same in today in which children should wear size-fitted shoes, from which the boundless business opportunities arise.

In the past, the shop assistant also was the seller. Nowadays, a store can be a service hub where every shop assistant is a waiter who grasps the professional skill. Goodbaby now is busy integrating the resource online and offline. Even mothers’ enthusiastic chats in BBS are viewed as valuable resource, of which the content can be an ideal or an appeal.

An incentive mechanism can be established with moms so that they become an important element in service chain.

Third is the control over the standard setting

Goodbaby participates in 70% setting of standard at home and further become a constitutor of international standard. It is encouraging to see that Chinese companies has a part of discourse right on traditional manufacturing including special steel, steel wire and baby care product.

The last but the foremost is government’s efforts to protect intellectual property.
Some people are always talking about tax reduction, but for established companies, the most needed thing is not the tax reduction but the solution to their biggest concern. The innovation on which company spend tremendous energies can be demolished in one day. If their newly-developed products are manufactured everywhere without their knowledge, they will have no gain for innovation.

When hearing the call of Song Zhenghuan, Goodbaby president, I recall another company whose molds are all made by itself. The reason still rests on the intellectual property right, because there exist many counterfeits on market and the government official uphold the mentality that mass have the immunity to regulation and forging products of others is conducive to poverty elimination. Then the innovative company has nowhere to go.

Not all governments act in this way. It’s seen that a few official have in-depth understanding of innovation protect, most of them from cities like Suzhou which achieved primitive accumulation, ascended to the middle-high end of manufacturing and harvested the appreciation of IPR

2.Suzhou BioBay: government puts excessive efforts on unnecessary things but leaves behind the important

Nanometer is the frontier in the new technology on which every country is seeking the discourse right
Each seen product is advertising nanometer, from cosmetics to healthcare products and daily necessities, but the innovation in real sense is not enough.

Government should step in the basic technology field which will have century-lasting influence. Government in countries like United States, Japan and Korea where such leading companies as Microsoft and Samsung emerge, head the basic research. In Russia and Malaysia, nanotechnology researches are also guided by government

China also follows the suit. However, the problem is the deep division among industry steering committee in Ministry of Science and Technology, Ministry of Education, Ministry of Industry. These departments seem value the industry. When they see the healthy outlook and are able to carve up the profits, they are eager to take in charge. If the industry needs to be coordinated, seeking help from these departments is of no avail.

Government lacks systematic management on basic research, one area controlled by many sectors but having little resources to grow. Each department should form systematic management to regulate efficiently. Anyone making innovation or commercialization should be given reward. Result does not come out well in practice. The problems existing dozen years ago is not resolved yet.

The solutions the governments find is high-tech parks and industrial park in which industries convene. Resources gathered, the outlet towards answer is formed. As China’s economy is on track to transform, it’s time to address the problem on top-level design by converging the power of high-tech parks.

Just in Suzhou, with a view to forging leading position on industry and talent recruitment, comprehensive innovation districts like Dushu Lake Science and Education Innovation District and Suzhou science and technology Town are completed, innovation platforms like Institute of Nano-Tech and Nano-Bionics and Institute of Biomedical Engineering are introduced, near 20 specialized industrial parks including Biobay and 89 technology incubators above province level like the innovation park for overseas students in Suzhou are built up.

In addition, boss of Biobay admires a revolutionary move that is outsourcing intelligence. He particularly mentioned Aliyun’ s measure that converges 70 thousand innovators who create knowledge to found China International Intellectech Corporation. Companies invite bids on this platform which gathers tens of thousands of brains and possesses all data in education and knowledge industry.

It is a trend that already happens outside China. P&G and Unilever now are compressing the research teams in headquarter and resorts to outsourcing which lowers costs and improve efficiency.

3.Skyray Instrument, Beiren Robot and Innovent Biologics

Skyray Instrument tells us that unattainable goal has been realized. For instance, environment protection department is equipped with its facility which can measure the smog component precisely so that they can deal with the smog in an ordered way. Now the difficult is the choice between economy and environment protection.

It is impressive that antiquities can be examined precisely. Nevertheless, this method is unpopular in market where people still use naked eyes during cultural relics Identification and transaction. The reason will not be mentioned here.
Beiren Robot and Innovent Biologics showcase the realistic path of China’s companies to make innovation that it is not achieved overnight but step by step.

World’s robot field is dominated by four companies, ABB, Kuka, Fanuc, Anzhong. So far, the core spare parts of Chinese robot are imported.

If we want to exceed at a curve, two things must be done.

First is acquisition. Midea announces that the preparation to purchase Kuka Group entities will be finished on January 6, all money is paid, 37,605,732 shares of Kuka Group are owned, accounting for 94.55% issued capital stock, through MECCA International(BVI)Limited, a wholly-owned subsidiary company overseas.

Second is the integrated simulation of non-standard design. Corporations who need robots have different demands, with broad applications. During the stimulation, China’ s companies learn the technology. Arc welding robot is a typical example.

The gross profit margin of the best robot in industry sector can reach 20% to 25%, with 10% net profit. Because some domestic robot companies have learnt a part of technology, plus the safety margin, international robot companies have to cut price. ABB sells arc welding robot at price of 110,000 to 120,000, while it sold for 300,000 in 2000. This robot of Chinese brands sells for 90,000. Considering the speed of robot replacing human at an increase of 25% to 30% every year, there comes the crucial time for China’s robot companies to expand.

Innovent Biologics sheds new light on the path in China for bio-pharmaceuticals. Best talent works with first-class company. Innovent Biologics has close interaction with Eli Lilly and undergoes phase III trial of several macromolecular drugs. 5 workers from Eli Lilly resided permanently in Innovent Biologics.

It is unrealistic for Chinese companies to spend 1 billion dollars on developing new drug that has fat chance to succeed. The best way is to draw from India, producing generic drug at first. That is exactly the way we did. We are seeking market and producing the drug quickly before patent life expires.

Now the course of treatment of Innovent’ s anticancer drug lasts for three months and costs some 150,000 dollars with fastest speed.

4.What can government do in the competition for talent recruitment in city?

The competition among cities in future China is the tussle for talents and environment.
Because government has already controlled resources, the tussle for talents reflects the attention governments attach to talents. Now the competition among different cities is roaring.

The report in November, 2016 shows that Suzhou possesses 2,280 million talents and introduces 20,000 overseas returnees of which 219 people is selected into Thousand Talents Program. Among 219 people, 120 people are identified as start-up talents, making Suzhou listed first among large and medium sized cities.

Advantage in location is one of the reasons why so many people choose Suzhou. Suzhou, geographically close to Shanghai and Nanjing, sits at the prosperous agglomeration of core cities of Yangtze River Delta, with normal commodity prices compared to Shanghai.

The second reason is thick sycamore tree. Suzhou, as the second largest industrial city, has well-functioning industrial base and establishes over 20 industry parks including Biobay, as well as the 89 technology incubators above province level like the innovation park for overseas students in Suzhou.

Except the detailed assessment of governments at town and district level on talent, upstream-downstream service system is established. The efforts are made to facilitate talents settlement and start-up, and two aspects are sized to address financial difficult for high-level talents: one side is to promote equity investment center. Through government’s efforts to set up guidance fund and supporting investment, social capital can be leaded and integrated to involve in the entity investment for scientific and technological enterprises at early stage so as to gradually establish the cluster district for start-up and investment industry centered on Sha Lake Equity Investment Center. Up to the end of 2016, there are near 300 institutes which undertake start-up and investment and are recently active on market, managing total fund of 100 billion dollars. The other side is to create a new way to creditor’s rights investment. To solve financing difficulties for medium and small-sized scientific and technological enterprises, 1 billion special fund of credit risk compensation, Ke Dai Tong business is launched that aims at promoting banks to provide SMEs with credit support of low threshold, low interest rate and full energies is put on creating relaxed financing environment for start-up and company development.

As of the end of 2016, Ke Dai Tong provides financing services to 2616 companies which make scientific and technological innovation, loans reaching 20.15 billion yuan.

Either the high tech or talent requires an ecosystem for living and starting business. Even with the help of academician and one billion funds, ecology of science and technology cannot be established on a barren place.

The key is the upstream-downstream industry and service chain and a good expectation for future making talent feel worthy ten year later.

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