China’s SME Revolution: From Millions to the Backbone of the Economy

From the 1990s Exodus to Over 40 Million Strong – A Journey of Job Creation, Innovation, and Economic Restructuring

In the 1990s, millions of Chinese workers departed from state-owned enterprises, embarking on a journey toward the promising realm of Small and Medium-sized Enterprises (SMEs). At that time, the aggregate number of private SMEs in China had already exceeded one million, marking only the beginning of a transformative era. Over the subsequent decade, there was a rapid surge, surpassing even the combined growth of SMEs in the United States and Europe. 

By 2004, the landscape had undergone a profound change, with over 40 million SMEs flourishing like a vibrant forest, spanning diverse sectors. These enterprises not only created millions of job opportunities but also acted as catalysts for innovation, propelling China's economic rejuvenation. This moment represented a monumental shift in the structural landscape of the Chinese economy. 

As of 2021, the number of SMEs in China has reached 48.81 million, representing an 8.5% increase from the previous year. Among them, the professional services and wholesale-retail sectors experienced the fastest growth. The industry distribution of SMEs (excluding enterprises with fewer than 10 employees) is uneven, with over 70% concentrated in professional services (including internet and technology services), logistics wholesale, retail, and manufacturing. The proportion of SMEs in sectors such as telecommunications, finance, education, transportation, and public utilities is less than 10%. Moreover, the regional distribution of SMEs is uneven, with the majority located in the southeast coastal areas, and the Shanghai-Jiangsu-Zhejiang postal area (Shanghai, Jiangsu, Zhejiang) accounting for the highest proportion.

To strengthen support for Chinese SMEs, a series of policies aimed at stabilizing growth have been implemented. The confidence of SMEs in China has been on a continuous rise, as evidenced by the Small and Medium-sized Enterprise Development Index (SMEDI) reaching 89.4 in August of this year, a 0.1-point increase from the previous month and a consistent upward trend for three consecutive months. This index is also higher than the level observed in the same period in 2022 and remains steady compared to the same period in 2021.

In China, SMEs contribute over 50% of tax revenue, more than 60% of GDP, over 70% of technological innovation, more than 80% of urban labor employment, and over 90% of the total number of enterprises. It can be asserted that the continuous development of China's SMEs serves as the foundation for the sustained progress of Chinese society and its economy.

Within China's evolving SMEs growth and the growing need for regional trade alliances, Mail Boxes Etc.’s service plays a pivotal role in catering to the escalating demands for efficient freight services such as  meticulous cargo tracking, robust supply chain management, and adaptable logistics solutions tailored to diverse product categories and specific target markets.

(Photo: Unsplash by David Veksler)

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