Please sign in or create an account to download the full report.
In recent years, the policy environment for small and medium-sized enterprises (SMEs) in the People’s Republic of China has undergone a significant transformation. Every year, the EU SME Centre’s Advocacy Platform sets out to provide with the Policy Environment Report an overview of the most significant developments affecting SMEs operating in the country.
SMEs constitute an overwhelming majority of the enterprises in China and are key to its economic development. Around 50 per cent of the nation’s tax revenue and 60 per cent of China’s gross domestic product (GDP) come from SMEs. Small businesses are also major contributors to employment and innovation. In 2022, the total number of micro, small and medium-sized enterprises in China exceeded 52 million, with specialised SMEs accounting for 59 per cent of enterprises that went public (in terms of the capital market).
As in China, SMEs are the backbone of the European Union’s economy. In 2022, there were around 24.3 million SMEs active in the EU, representing 99.8 per cent of all enterprises in the non-financial business sector. These SMEs accounted for just under two-thirds of employment and slightly more than half of the value added in the European Union.
When it comes to international trade, the European Commission estimates that, as of 2021, micro, small and medium-sized enterprises represented 93.6 per cent of exporting enterprises for extra-EU exports and accounted for 30.4 per cent of the value of extra-EU exports.
In absolute numbers, the most recent available estimates indicate that around 600,000 SMEs are engaged in exports of goods. While most of these SMEs tend to trade within the Single Market (that is, between EU Member States), the most updated data on European SME internationalisation by a Eurobarometer survey shows that only 3 per cent of EU SMEs exported to China as of 2019.
Enquiry data from the EU SME Centre’s Phase IV (starting from July 2022 and as of late June 2024) shows a predominance of businesses in food and beverages, machinery, cosmetics, information technology and retail looking to benefit from Centre services. The top six countries of origin for SME enquiries were Italy, Belgium Spain, Germany, Poland, and France.
Although this does not constitute a comprehensive overview of European SMEs either doing business or looking to do business in China, the data provides an indication of what types of companies are looking into the country as a potential export or investment market.
The strong export momentum in China in the past few years has exacerbated concerns from some economic partners over growing trade imbalances and distortions to the domestic markets caused by cheap and subsidised products. This has led to an increase in trade tensions, with actors like the US, Turkey, and the EU initiating a series of trade defence investigations over products like electric vehicles.
China’s fragile recovery since the relaxation of zero-COVID measures has broadly been reflected in SME performance indicators such as the China Association for SMEs’ (CASME) SME Development Index. The latest numbers indicate that, although there has been a clear upward trend, the numbers are still not back to pre-pandemic levels.
Looking at European business performance and sentiment, according to the European Union Chamber of Commerce in China’s Business Confidence Survey 2024 (BCS 2024), 68 per cent of respondents indicated that doing business had become more difficult in 2023, with China’s economic slowdown cited as a top concern. The lowest level of respondents on record also reported increases in revenues – with SMEs as the group with the highest percentage of decreased revenues and negative profits (35 per cent and 19 per cent respectively).
This, coupled with a perception of some positive but overall limited improvements in terms of market opening and the prevalence of regulatory barriers, has impacted European companies’ confidence in the Chinese market and their investment plans in China. According to the BCS 2024, although European companies still consider China as a potential investment destination, the lowest percentage on record of respondents now rank China as their top one.
Aware of the macroeconomic pressures impacting the post-pandemic recovery and confidence levels among industry players, the Chinese government has rolled out several announcements aimed at supporting the private sector and foreign investors.
1. Introduction to SMEs in China
1.1. Definition and classification of SMEs in China
1.2. European definition and classification of SMEs
1.3. European SMEs and China – data from the EU SME Centre
2. Analysis of the current policy environment of SMEs in China
2.1. Financing and reduction of financial burden
2.1.1. Financing
2.1.2. Reduction of financial burden
2.2. Administrative procedures and services
2.3. SME market development
2.3.1. Talent acquisition and retention
2.3.2. Competition and procurement
2.4. Protection of the rights of SMEs and supervision mechanisms
2.4.1 Intellectual Property
2.5 Innovation and Entrepreneurship
2.6. Digital transformation of SMEs
2.7. SME green development
3. Conclusion
