One industry's difficulties could be a gold mine for another - and the International Center for Small and Medium Enterprises plans to help identify those opportunities.

The foreign-invested firm started operations in Shanghai this week, helping smaller overseas companies to launch their businesses in China.

ICSME is among the growing number of foreign-founded incubators in China to challenge domestic peers, usually dominated by government departments and banks.

"SMEs have a lot of specific and deep knowledge, but may not have made the leap into China," said Alp Altun, managing director of ICSME. "They can bring broad distribution of high value and high-tech to grow China's economy to a higher level, in addition to bigger companies."

ICSME Shanghai was the first foreign enterprise incubator in Shibei Industrial Park in downtown Shanghai, opening paths for European and American SMEs to pioneer business in China.

Altun said that compared with government-founded incubators, ICSME is more independent and has more value-added services, including marketing, taxation consulting as well as human resources training.

"Shanghai is the first step, and the market reaction is very positive," said Altun. His company won six international clients within its first month.

Heinz Fraunhoffer, director of ICSME, expects it will have 25 to 30 clients by February next year, and the customer base is forecast to grow to 50 or 80 by the end of next year.

ICSME is also negotiating with local governments in another five cities, including Shenyang, Dalian, Chengdu, Shenzhen and Nanjing for support structures.

Altun said around US$350 to US$400 million is needed to build a nationwide presence for ICSME. It is also under discussion with private funds in the United States, Sweden and Germany for capital assistance to fund the firm's further development.

China's gross domestic product, which has grown by an average of 10 percent annually over the past five years, is luring foreign SMEs.

The nation is also encouraging SMEs to play a bigger role in its economy, particularly by introducing advanced technology.

Shanghai Technology Innovation Center established International Business Incubators with local partners last year. It now has six bases and cooperates with overseas firms in the US, France and Japan.

ICSME said it also aims to help Chinese companies invest in overseas markets as well as enhance cooperation with foreign companies.