{"id":4484,"date":"2021-11-24T11:29:04","date_gmt":"2021-11-24T10:29:04","guid":{"rendered":"https:\/\/www.ecovis.com\/a20-heidelberg\/the-rise-of-smes-in-china\/"},"modified":"2025-05-15T10:22:57","modified_gmt":"2025-05-15T08:22:57","slug":"the-rise-of-smes-in-china","status":"publish","type":"post","link":"https:\/\/www.ecovis.com\/heidelberg-en\/the-rise-of-smes-in-china\/","title":{"rendered":"The Rise of SMEs in China"},"content":{"rendered":"
Small and medium enterprises (SMEs) are the driving force of China\u2019s economic growth. Since the economic opening of China in the 1980s and the possibility for private enterprises to enter the market, they have continued to thrive, currently making up about 97% of all enterprises in China.<\/figure>\r\n

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The Chinese market is also becoming increasingly attractive for foreign SMEs<\/strong>, with a variety of glistering opportunities among the changing circumstances and challenges. The key factor to a successful entry into the Chinese market is to be well informed \u2013 future investors, take out your notes: follow us into a quick introduction to the definition, current situation, challenges, and opportunities for SMEs in China.<\/figure>\r\n

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How to define SMEs?<\/strong><\/figure>\r\n

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Compared to other OECD economies, the definition of SMEs in China is a little more complex. Instead of only looking at the number of employees, SMEs are defined based on China\u2019s SME Promotion Law<\/strong> from 2003. The classification differs between industry categories and is based on the number of employees, sales, and assets. A first glance at the following chart of the exact classifications might be surprising \u2013 their size seems to be quite big compared to European or U.S. SMEs. Yet if we consider the labor intensity of the production and the huge size of China, they are in fact relatively small.<\/figure>\r\n

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\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Size Category<\/strong><\/td>\r\nIndustries<\/strong><\/td>\r\nEmployment-based<\/strong><\/td>\r\nTotal assets<\/strong><\/td>\r\nBusiness revenue<\/strong><\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\n<\/tr>\r\n
Small<\/strong><\/td>\r\nIndustry<\/td>\r\n< 300<\/td>\r\n< 40 mil. RMB<\/td>\r\n< 30 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nConstruction<\/td>\r\n< 600<\/td>\r\n< 40 mil. RMB<\/td>\r\n< 30 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nWholesale<\/td>\r\n< 100<\/td>\r\n\u00a0<\/td>\r\n< 30 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nRetail<\/td>\r\n< 100<\/td>\r\n\u00a0<\/td>\r\n< 10 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nTransport<\/td>\r\n< 500<\/td>\r\n\u00a0<\/td>\r\n< 30 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nPost<\/td>\r\n< 400<\/td>\r\n\u00a0<\/td>\r\n< 30 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nHotel Restaurant<\/td>\r\n< 400<\/td>\r\n\u00a0<\/td>\r\n< 30 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
Medium<\/strong><\/td>\r\nIndustry<\/td>\r\n300 – 2000<\/td>\r\n40 – 400 mil. RMB<\/td>\r\n30 – 300 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nConstruction<\/td>\r\n600 – 3000<\/td>\r\n40 – 400 mil. RMB<\/td>\r\n30 – 300 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nWholesale<\/td>\r\n100 – 200<\/td>\r\n\u00a0<\/td>\r\n30 – 300 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nRetail<\/td>\r\n100 – 500<\/td>\r\n\u00a0<\/td>\r\n10 – 150 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nTransport<\/td>\r\n500 – 3000<\/td>\r\n\u00a0<\/td>\r\n30 – 300 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nPost<\/td>\r\n400 – 1000<\/td>\r\n\u00a0<\/td>\r\n30 – 300 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nHotel Restaurant<\/td>\r\n400 – 800<\/td>\r\n\u00a0<\/td>\r\n30 – 300 mil. RMB<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/figure>\r\n
Note: SMEs meet one or more of the conditions. MEs should meet three conditions, the others are SEs. \u00a0 Source: SME Promotion Law of China, 2003.<\/figure>\r\n

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\u00a0The backbone of China\u2019s economy<\/strong><\/figure>\r\n

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A lot of changes happened since China\u2019s economic structure has been transformed in its fundaments. From 1998 to 2003, nearly 19 million workers left state-owned enterprises (SOEs) to get reemployed at SMEs. The number of SMEs in China is growing rapidly: in the 1990s, more than one million private SMEs emerged \u2013 10 years later their number skyrocketed and overthrew those of Europe and the U.S. combined. In 2004, the number of SMEs in China rose to over 40 million according to China\u2019s National Bureau of Statistics (NBS). Let\u2019s put that into perspective: the number of SMEs in Europe at that time was about 10 million.<\/figure>\r\n

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According to the\u202fChina Statistical Yearbook, in 2015 SMEs made up about 97.9% of all registered companies in China. Their total assets have been around 53.4% of Chinas total number, their revenue was 62% of the total and the profits were 64.3% of the total with a number of 4.26 billion Yuan. They also contributed nearly\u202f58% of the GDP and 68% of exports. SMEs also provide most of the total employment opportunities: 82% of employees find their workplace at an SME.<\/figure>\r\n

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Despite the slowing growth of the Chinese economy, SMEs are still on the rise.<\/strong> In 2016, net profiles of SMEs listed in the National Equities Exchange and Quotations system (NEEQ) rose about 26.29% and their annual reports showed an increase over 25% of the annual business revenue. The total assets also expanded about 23.9%. Expenses for research and development also increased to a total number of 11.58 billion RMB.<\/figure>\r\n

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\u00a0 Financing issues\u00a0<\/strong><\/figure>\r\n

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Let\u2019s have a look at the hurdles that SMEs are facing in China. The SME\u2019s worst adversary is a troublesome access to funding. While the SOEs and big companies get their loans from state institutions, SMEs are mostly left out in the cold. Here are some facts to create a picture of the situation: According to China\u2019s Enterprise Surveys data,<\/figure>\r\n

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\u00a0\r\n