Advertisement
China manufacturing
EconomyChina Economy

Explainer | China’s SMEs: how important are small firms to the economy, and what challenges are they facing?

  • Small and medium-sized enterprises contribute substantially to China’s economy, including about 80 per cent of non-government employment
  • Since the start of the coronavirus pandemic, they have faced numerous challenges, from rising production costs to regulatory tightening

Reading Time:3 minutes
Why you can trust SCMP
1
Small and micro businesses are the backbone of China’s private sector. Photo: AP
Jess Ma

China’s small and medium-sized enterprises (SMEs) have faced a host of challenges since early 2020, ranging from the economic shock of the coronavirus pandemic to surging commodity prices and regulatory challenges.

Advertisement
Some of them are crumbling under the pressure, but Beijing’s attempts to alleviate their problems highlight just how important they are to the nation’s economy.

What counts as an SME in China, and how many are there?

Businesses in China are categorised by ownership and size.

State-owned companies are completely or partially owned by the state. Equity can come in the form of investment at a local government level or complete ownership under the central government.

Private businesses are established by individuals and do not receive state funding. Small, medium, and micro enterprises in China tend to be private businesses that fall under the government’s designated limit on the number of employees, revenue and total assets.

Advertisement
Advertisement