(Yicai Global) Sept. 27 -- Some 79 percent of Chinese small and medium-sized companies have a low level of digitization and face challenges from a lack of funds, inferior technology and inadequate human resources not to mention the danger of data leaks, according to a recent report.

Most small businesses are still in the exploratory stage, with only a vague path towards upgrading and there are distinct differences between sectors, according to a report released by the National Institute of Big Data on Sept. 25.

The government needs to link arms with platforms to build a digital network ecology and online procurement platforms to help resolve data safety issues for small companies, said the institute which was set up in June 2020 by the State Council’s Development Research Center to provide innovative research and value-added data services.

Given procurement is at the heart of businesses' supply chain management, using procurement as an entry point for digitization will make it easier for small and medium-sized firms to upgrade while better coordinating development with large corporations, the report said.

Digital transformation requires the sustained input of funds, technology and highly qualified staff, said Li Chengjian, deputy director of the second study room under the Development Research Center’s department of macroeconomy research. It is difficult for smaller companies to continuously invest resources and energy in digital transformation, especially those hit by Covid-19.

The Chinese government has recognized the problem and in August said that central government finance will be used to help local governments assist in the digital transformation of small businesses.

The funds will be used to carry out three sets of digitization trials for small companies between 2022 and 2025, said the Ministry of Industry and Information Technology and the Ministry of Finance. The money will also support 300 public services platforms and build between 4,000 and 6,000 models of digital transformation to accelerate the pace of digitization by small firms and promote the development of specialized, refined, differential and innovative entities.

Editors: Shi Yi, Kim Taylor