Smaller firms with backward technology and deplorable records on the quality of their goods should exit the market, and those producing fake and shoddy goods will have their licenses revoked, an influential State Council commission warned over the weekend.

The current product quality of the country's smaller businesses is far from satisfactory, and a large number of SMEs have been churning out inferior or fake products, according to the State Economic and Trade Commission.

In a document made available to China Daily on Saturday, the commission said that it recently conducted a survey of more than 2,000 SMEs along with the State Bureau of Quality and Technical Supervision.

They found more than 25 percent of SMEs make substandard products, and only 35 percent of them manage the production process well.

The situation prompted the two agencies to issue a joint circular on Saturday, demanding SMEs to attach top importance to quality management and to adopt stringent measures to enhance quality.

SMEs, which are largely comprised of individually owned and privately run enterprises, account for more than 90 per cent of the country's registered businesses, according to Wei Dong, director of the commission's SME Department.

They employ 75 percent of the country's urban workforce and have contributed 60 percent to the country's annual export volume in recent years, making them obviously important to the nation's economic development, according to the official.

The circular urged smaller firms to upgrade their technology to improve the quality of their products and to develop brand names, which is also essential for them to grab a greater share of the market.

The managers of SMEs should be held responsible for the quality problems of the enterprises, and firms that produce products that are related to people's health and the safety of property should strictly abide by the relevant compulsory standards to ensure their products gain safety certification, noted the circular.

Quality monitoring in the production process should be enhanced so that no substandard raw materials are used and no poor products enter market, and punishment should be meted out to those producing inferior products, said the document.

In addition to reaffirming the country's firm determination to strike hard against those manufacturing or marketing fake and shoddy products, the circular also encouraged SMEs famous for their high-quality products to employ legal means to fight against those who infringe upon their interests and rights.

In China, the way the size of an enterprise is determined varies depending on the sector. The normal standard designates firms with total assets or annual sales not exceeding 50 million yuan (US$6 million) as SMEs.

(China Daily 04/02/2001)