American small to medium-sized enterprises (SMEs) account for 99.7% of all U.S. companies and employ more than half of the 60 million-strong private sector workforce.  Yet only 1% of the nation's 28 million small businesses export. Of U.S. SMEs that do export, only 10% export to China, America's fastest growing export market.

At Friday's AmCham Shanghai SME roundtable, attended by Under Secretary of State Robert Hormats, Under Secretary of Commerce Francisco Sanchez and other federal, state and local officials, AmCham Shanghai leadership called for a doubling of the number of U.S. exporting SMEs from 1% to 2% by the end of 2014 and emphasized the key role the China market must play in achieving this goal.  An increase to 2% would translate into billions of additional dollars in exports and would support millions of new, high quality American jobs.

"SMEs play a critical role in powering the U.S. economy.  Although we are seeing more interest among U.S. SMEs in the Chinamarket, only a very small percentage is active internationally," said Brenda Foster, president of AmCham Shanghai.  "One reason is China's challenging market.  While there is great opportunity, access to China's burgeoning market is getting tougher every day.  Government and organizations like AmCham Shanghai need to work together to assist with that access to support American SME competitiveness in China.  This will create opportunity not only for American small businesses, but for the economy as a whole.  The AmCham Shanghai SME Center is designed to do exactly that."

Solutions to these challenges were raised and discussed openly by attendees at the roundtable that emphasized the important role public/private partnerships must play in supporting the competitiveness of American SMEs around the world and in China.  In addition to AmCham Shanghai leadership and senior U.S. State and Commerce Department officials, attendees included representatives from the Small Business Administration, National Governor's Association, ExportDC and the Maryland State Trade Office.

Under Secretary Hormats led off the event with comments highlighting the importance of SMEs to the U.S.-China commercial relationship. 

"Creating opportunities for U.S. SMEs is critical to promoting two-way trade and investment between the United States andChina and that's one of the reasons I believe the work of the AmCham Shanghai, and the new SME Center, is so important," stated Under Secretary Hormats.  "AmCham Shanghai and its SME Center will also help connect U.S. state and Chinese  provincial government officials, as well as local business representatives, as they are the best positioned to build these connections.  This initiative is critically important because improving linkages between U.S. SMEs and Chinese SMEs will create more jobs in the United States."

Francisco Sanchez, Under Secretary of Commerce remarked, "American SMEs are the backbone of our economy and we've got to give their products and services every chance to succeed in the growing Chinese market.  The International Trade Administration has been proud to work with AmCham Shanghai over the years to increase market access and eliminate trade barriers.  Today's dialogue is another important step in this journey, and is sure to go a long way in helping U.S. businesses increase their export sales, strengthen their bottom lines, hire new workers, and generate economic growth."

In China, a complex, changing and in some cases uneven regulatory regime discourages many U.S. SMEs from exporting or expanding their businesses there.  China's  regulatory environment itself is among the most significant challenges. The results of the 2012 AmCham Shanghai SME Challenges Survey, presented at Friday's event, found that nearly three-quarters of U.S. SMEs surveyed indicated that an unclear regulatory environment negatively impacted their business by adding costs and undue risk to their operations. More than half report that a perceived preference for Chinese companies "somewhat hindered" their business.  Day to day concerns, such as obtaining required licenses to operate their business in China were cited as a concern by more than half of responding SMEs.

The survey also shows that the threat of intellectual property theft as well as the limited resources small companies have to seek redress of grievances was particularly acute among American SMEs. 44 percent of U.S. SMEs cited the lack of "protection and enforcement of your IPR" as a hindrance to their business in China and almost one-third indicated concern for the theft of their company's trade secrets.

The China market attracts companies from all over the world and is an increasingly competitive environment. U.S. SMEs compete with small business from Germany and elsewhere in Europe, Japan and Australia who often receive significant support from their home governments.  Limiting factors like "unfair competition" and trouble "finding the right customers" were both ranked by more than two-thirds of SMEs as top challenges.

These obstacles are amplified by a lack of resources available to SMEs when compared to larger multinational companies. SMEs face additional functional challenges that range from basic market knowledge to acquiring export financing or other capital needs to complete orders, generating overseas sales leads and being aware of external business support sources, such as U.S. government assistance.  

With these obstacles in mind, AmCham Shanghai is taking steps to equip SMEs with the tools to navigate a challenging business environment in China. The AmCham Shanghai SME Center, to be launched on November 6 in Shanghai, will consist of both a physical and virtual resource and referral platform.  The Center will provide targeted services for SMEs interested in exporting to or expanding their operations in China via best-in-class resources and referrals to its 3,700-strong member network.