Appendix 4. Case Study: A Private Company in Zhong Guan Cun Zone

This private company in Zhong Guan Cun Zone, where many high-tech private companies are located, is carrying out research work in pharmaceutical science and technology to develop high-tech pharmaceutical products for the treatment of diseases, health care and the improvement of the quality of life in general (modern and traditional Chinese medicine and health care). It was established by an overseas Chinese student several years ago. Presently, it has no relations with SOEs or foreign-invested enterprises.

It seems that the company has the widely recognized features of private enterprises in many respects. It seems to be a family-type, small individual business. Since the manager (CEO) and his relatives are major investors, the management and ownership are not necessarily separated and decisions are basically made by the individual rather than organization. The educational backgrounds of employees are higher than average, and they are relatively young. The company is involved in a high-tech market that is not dominated by large traditional SOEs. A significant role is played by people who studied and got expertise abroad.

The firm's major problem is financing, or more specifically accessing bank loans. Consequently, it has to rely on local government and national funds either directly or indirectly. More specifically, it has the following features.

It has more than 30 regular employees and about ten part-time workers. More than 85% hold a bachelor’s degree or above. The average age of the employees is 32. After carrying out collaborative work for several years, the company is now a highly qualified, united and cooperative team, consisting of 13 senior researchers, some with PhDs. The scientific research work is mainly carried out by scholars who were educated overseas and then returned to the PRC. Through this research team, the company has established various connections with domestic and overseas universities and institutes.

In a relatively a short of time period, the company has successfully achieved a series of research and development milestones, including the development of new drugs and health care products. Currently more than ten products in genetic engineering, traditional Chinese medicine and health care are in the R&D process, and patent applications for five have been filed in the PRC.

There is a board of directors, and the CEO reports to the board. The board includes two partner investors. One is the CEO and the other is a relative of his. There are also three executive offices: the Administration Office, Office of Human Resources and Office of Finance. In addition, there are several technology divisions. As far as the organizational structure is concerned, there does not seem to be much difference with private companies in Western countries.

The company does have a series of management regulations. However, in most cases the decisions are made by the CEO himself.

The company mainly targets the domestic market, making great efforts to become one of the largest enterprises engaged in biological products in the PRC. After gaining an advantageous position in the domestic market, it may attempt to enter the international market.

The firm's financial resources come mainly from individuals and the central government. The Beijing Municipal Government also supports the project. Currently, the company has received a 20 million RMB bank loan with the help of the local government, and started to establish a production base in Qingdao in Shandong Province.

Nevertheless the main difficulty faced by the company is access to loans from commercial banks. Its own resources are limited and insufficient to support the rapid development of the enterprise. The managers argue that the current financial system in the PRC is not designed for private SMEs, and feel they have no choice but to rely on the public sector in one way or another.

Comment(s)

There are [0] comment(s) for this entry. Post a comment.