Small and medium-sized enterprises (SMEs) cover a significant share in production in every national economy and play an important role. SMEs are businesses where new ideas are born and grown, making an essential contribution to people by providing employment opportunities. Because they are small in scale and are often relatively new, they become even more fragile during difficult times. Supporting them and ensuring they survive through difficult times is an essential strategy for any national economy targeting healthy economic growth performance.
The COVID-19 pandemic and the global financial crisis that started in 2008 in the US have changed the conditions for SMEs adversely, and their production costs have increased. The pandemic has thus been a nightmare for most, if not all, SMEs. Long lockdowns, declining economic conditions due to people's shrinking income, and supply chain issues are among the most prominent factors that have plunged SMEs into a deep crisis. Many SMEs have gone bankrupt in some countries as a result of a lack of adequate support, and these countries are experiencing increased economic and financial difficulties. On the other hand, some developed countries have recognized the importance of supporting their SMEs, and their economies are in relatively better shape.
One such country is China. It has one of the world's largest economies, and its big population has significantly contributed to global production activities. Indeed, it is safe to say that Chinese products can be found in almost every home around the world, and its economy has outperformed all others in terms of growth in the last ten years. Chinese SMEs, like those in many other national economies, play a critical role in this success, accounting for nearly 80% of total output.
How China Helps its SMEs
In the last three years, China has provided an increasing number of financial resources to SMEs. It has been lending much support even during the pandemic, with its banking and insurance authorities issuing a circular to promote their SMEs. Two critical supports are the provision of loans with relatively lower interest rates in the medium and long run, as well as the expansion of availability to more SMEs. The circular's main goal is to reduce the financial risks that Chinese SMEs face. Moreover, additional financial services will be available to further assist them. Given that SMEs will need to replace their machinery and other production systems, these services are both urgent and beneficial to their operations.
Moreover, in 2021, the total funds used to support these businesses reached $2.59 billion, with over 27 million people benefiting. China is being wise and investing in its future by assisting its SMEs in surviving the pandemic. This investment brightens the country's future since Chinese SMEs are expanding their capacity even during a crisis, and China may soon have even better economic growth performances.
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