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2006 Hebei Province, 460 enterprises above designated size of flour, flour production capacity to reach 11.8 million tons, while the actual annual output of 580 million tons, started less than 50% productivity. This situation is just a microcosm of the national flour industry, most SMEs have less loss win-win is a fait accompli. Meanwhile, the average level of profitability of China's Flour Enterprises kept at about 1%, the highest level of profitability is also difficult to more than 3%. Serious excess capacity and the venture capital gap, which hinders the flour industry. Flour as a staple food materials, in the food industry is very broad range of applications. Present, however, lack of raw wheat, excess capacity, a vicious price cuts, lack of funds and other issues have seriously affected the healthy development of China's Flour Industry. The first is excess capacity. By the 2003 and 2004, wheat, flour prices influence in recent years throughout the country, particularly in wheat flour, the main producing areas of the number of enterprises increased sharply, so that the flour production capacity rapidly. According to incomplete statistics, three-year period 2004-2006, completion, production and in construction, started the annual processing capacity of the mills added more than 3,000 million tons, if coupled with integration of data leakage may be 4000 million tons. Before 2000, China's annual processing capacity of wheat, which is the national flour mill processing capacity is approximately 150 million -1.6 million tons, while the annual demand for the actual amount is the quantity of processing 80 million -9.0 thousand tons, in sharp contrast with the capacity China's wheat output is also in the 90 million -1 million tons. From this set of data can be seen, while in 2000 China's production and processing mills ability to clearly beyond the capacity to almost double the demand, but also significantly exceeded the actual production of wheat in China. The past three years, additional capacity is the capacity in 2000, based on the rise, according to the most conservative basis, the production capacity of China's Flour Industry 1.9 million tons, higher than the actual output of 100 million tons, higher than the national wheat production nearly a million tons. According to a well-known company CEOs Hebei introduced by additional 30 million tons production capacity calculation, the country has added the equivalent of 200 500 tons of flour mill. Therefore, the current operating rate of the flour industry average less than 50%, and some new projects launched or dismount. Second, because a large number of flour of low-cost cut-throat competition, leading to a low level of corporate profits of China's wheat flour, the average profit level of about 1%, the highest level of profitability is also difficult to more than 3%. Industries, such as flour at 3% of the profit level, 300 tons of flour a year, achieve a 1 billion business sales revenue, profit for the year, six million yuan, according to 1% of the amount is 2 million yuan. Thus, low levels of profitability, the lack of financing channels for enterprises resulted in some of China's lack of funds, which affect the development of the industry has become a prominent factor in another. Its specific expression in two aspects: First, in part by loans to build new businesses cash flow difficulties. Some enterprises from a policy bank loans were short-term liquidity, it will make its long-term investment in fixed assets that is building a new plant, after the expiry of short-term loans, but also took the bank's new loan from the same purchase price of wheat loan repayment, with repayment and then to the new loan to buy wheat. This will not only increase the risk of the enterprise, but also the risks extended to the bank. Second, the majority of enterprises in the acquisition phase of wheat to get the support of the banking sector, but the companies will be processed by the purchase of wheat required to immediately repay the loan, while the majority of the liquidity shortage, so difficult for enterprises to operate normally. It is because of lack of funds, the structure of China's Flour difficult to obtain scientific, timely adjustment, civil common powder processing is still the mainstream products, new product advantage is not obvious. View of the above circumstances, industry experts believe that only discard the low level of competition and avoid redundant construction, and from technology development, marketing, and so the introduction of innovative mechanisms, flour trade to developing steadily. China is the world's most populous country, and its flour production and consumption volume ranks first in the world. Meanwhile, along with rapid economic development and per capita income increase, for flour and deep-processed products, a rapid increase in demand. Flour, as related to the people's livelihood, major agricultural products, its market is very broad space for development. Thus, with increasing competition in the industry, as well as the improvement of people's living standards, those who rely solely on the maintenance of existing brands, while the decline in business R & D capabilities and ultimately to be those who are marketing capacity and funding, focus on R & D and marketing of innovative start-ups replaced. And as in Zhengzhou, Henan Province SHANGHAI flour company, with its unique product positioning, brand image for many years and careful planning, in 2005, after-tax net profit of 14 million yuan of the impressive performance of the enterprise, will be the labor-intensive enterprise into a technology-intensive businesses, keeping up with market demands, strengthen research and development, innovation, enhance and protect the product quality; key to open up regional markets, market segments brand, increase brand value, differentiation strategy adopted by [FS : PAGE] have more room for development. 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