Ping An Digital Economic Research Center (DERC)

Ping An - DERC

Ping An Digital Economic Research Center (DERC) utilizes more than 50 TB of high frequency data points, more than 30 years of historical data and more than 1.5 billion data points to drive research on the “AI + Macro Forecast” and provide insights and methods towards precise macroeconomic trends. 

Ping An DERC is a research center for Ping An Insurance (Group) Company of China, Ltd. (“Ping An”) is a world-leading technology-powered retail financial services group. With over 204 million retail customers and 534 million internet users, Ping An is one of the largest financial services companies in the world.

Ping An Digital Economic Research Center

Zheng Zeng

Macroeconomics

<div class="content-highlight">China SME Financing Report Series Report III by Fudan-Ping An Research Institute for Macroeconomy</div>The sudden outbreak of COVID-19 has brought unprecedented challenges to small and medium-sized enterprises (hereinafter SMEs), but it has also provided them with excellent opportunities to go digital. Digital transformation can eliminate information barriers between SMEs and financial institutions, improve information asymmetry and alleviate financing difficulties. In March this year, the Ministry of Industry and Information Technology of China (MIIT) issued a special action plan on digital empowerment of SMEs. Our research results confirm the necessity of this action plan: At present, the digital maturity of SMEs in China is low; high cost and tight budget are the main reasons that hinder their digital transformation. Accordingly, we suggest that Chinese governments at all levels increase their support to large technology companies that are developing standardized digital services which meet the needs of SMEs, and provide tax cuts and financing facilities for SMEs' digital transformation projects.In July this year, through on-site interviews and questionnaires, we surveyed nearly 100 enterprises (86% of them have fewer than 50 employees in 2019) in a national economic development zone in Shanghai, and found that:<ul><li>The digital maturity of the surveyed enterprises is low:</li></ul><ul>
<li>Low penetration of artificial intelligence and big data: more than two-thirds of the surveyed enterprises have not yet used artificial intelligence or big data in their production and business;</li>
<li>The proportion of online procurement and online sales is low: only 17% of the surveyed enterprises has more than 50% of their procurement done online, while only 14% of the surveyed enterprises sell more than 50% online.</li>
<li>The penetration rate of smart manufacturing is low: less than 18% of the surveyed manufacturing enterprises are building smart production lines, smart workshops and smart factories.</li>
<li>Low use of internet finance: over 64% of the surveyed enterprises have never used internet finance to obtain financing; among the 35 surveyed companies that have used internet finance, only 1 company get more than 50% financing through this channel.</li>
</ul><ul><li>Companies surveyed cited high cost and tight budget as major obstacles to digital transformation. 35% of the companies surveyed said the biggest obstacle to digital transformation was the high fees charged by service providers, while 30% said the biggest obstacle was lack of funds. At the same time, 97% of the companies surveyed realized that digitalization can help improve their operating efficiency and development. Therefore, reducing service providers' fees and filling the shortage of funds can effectively promote digital transformation among SMEs.</li></ul>Policy Suggestions: support the development of standardized digital services and provide tax cuts and financing facilities for SMEs’ digital transformation.<ol>
<li>By taking advantage of the large number of SMEs in China, the size disadvantage of a single enterprise is transformed into the quantity advantage of the whole economy. Thus, governments should support large technology companies that are developing standardized digital services which meet the needs of SMEs. In March this year, the Ministry of Industry and Information Technology of China proposed to cultivate and promote a number of digital platforms which meet the needs of SMEs. This survey confirms the necessity of this special action plan.</li>
<li>Provide SMEs with tax cuts for digital transformation.</li>
<li>Guide financial institutions to provide cheap loans to SMEs for digital transformation projects. Digital transformation can eliminate information barriers between enterprises and financial institutions, improve information asymmetry, help SMEs obtain more accurate credit assessment, and alleviate financing difficulties.</li>
</ol>

China SME Financing Report Series Report III by Fudan-Ping An Research Institute for MacroeconomyThe sudden outbreak of COVID-19 has brought unprecedented challenges to small and medium-sized enterprises (hereinafter SMEs), but it has also provided them with excellent opportunities to go digital. Digital transformation can eliminate information barriers between SMEs and financial institutions, improve information asymmetry and alleviate financing difficulties. In March this year, the Ministry of Industry and Information Technology of China (MIIT) issued a special action plan on digital empowerment of SMEs. Our research results confirm the necessity of this action plan: At present, the digital maturity of SMEs in China is low; high cost and tight budget are the main reasons that hinder their digital transformation. Accordingly, we suggest that Chinese governments at all levels increase their support to large technology companies that are developing standardized digital services which meet the needs of SMEs, and provide tax cuts and financing facilities for SMEs' digital transformation projects.In July this year, through on-site interviews and questionnaires, we surveyed nearly 100 enterprises (86% of them have fewer than 50 employees in 2019) in a national economic development zone in Shanghai, and found that:The digital maturity of the surveyed enterprises is low:
Low penetration of artificial intelligence and big data: more than two-thirds of the surveyed enterprises have not yet used artificial intelligence or big data in their production and business;
The proportion of online procurement and online sales is low: only 17% of the surveyed enterprises has more than 50% of their procurement done online, while only 14% of the surveyed enterprises sell more than 50% online.
The penetration rate of smart manufacturing is low: less than 18% of the surveyed manufacturing enterprises are building smart production lines, smart workshops and smart factories.
Low use of internet finance: over 64% of the surveyed enterprises have never used internet finance to obtain financing; among the 35 surveyed companies that have used internet finance, only 1 company get more than 50% financing through this channel.
Companies surveyed cited high cost and tight budget as major obstacles to digital transformation. 35% of the companies surveyed said the biggest obstacle to digital transformation was the high fees charged by service providers, while 30% said the biggest obstacle was lack of funds. At the same time, 97% of the companies surveyed realized that digitalization can help improve their operating efficiency and development. Therefore, reducing service providers' fees and filling the shortage of funds can effectively promote digital transformation among SMEs.Policy Suggestions: support the development of standardized digital services and provide tax cuts and financing facilities for SMEs’ digital transformation.
By taking advantage of the large number of SMEs in China, the size disadvantage of a single enterprise is transformed into the quantity advantage of the whole economy. Thus, governments should support large technology companies that are developing standardized digital services which meet the needs of SMEs. In March this year, the Ministry of Industry and Information Technology of China proposed to cultivate and promote a number of digital platforms which meet the needs of SMEs. This survey confirms the necessity of this special action plan.
Provide SMEs with tax cuts for digital transformation.
Guide financial institutions to provide cheap loans to SMEs for digital transformation projects. Digital transformation can eliminate information barriers between enterprises and financial institutions, improve information asymmetry, help SMEs obtain more accurate credit assessment, and alleviate financing difficulties.
  

Digital Transformation: A Game-Changing Strategy to Alleviate the Plight of SMEs in China