SMEs as motor of growth: A review of China's SMEs development in thirty years (1978–2008)

Abstract

China's economic and enterprise reforms since 1978 have dramatically altered the structure and dynamics of its enterprises. One of the most remarkable changes during the entire reform process is the rapid growth of small and medium-sized enterprises (SMEs). By looking at its thirty-year development, the contribution provides a thorough review of China's SME since 1978. It illustrates that the development of Chinese SMEs followed a principle of pragmatism. It shows that while the progress has been strongly affected by government policies and regulations, the emergence and expansion of SMEs are closely linked with social and economic problems that occurred during economic transitions and institutional changes. The key factors that affect SME development are identified, especially relating to cultural and institutional influences. The opportunities and challenges for SMEs in the new economic environment are discussed with special focus on their integration in the global economy. The issues of management development in SMEs are examined generally and in the Chinese context. Although major problems may differ at each stage of the reforms, evidence shows an increasing importance of SMEs in China's transformation to both modernization and industrialization. Indeed, SMEs have become the driving power in China's socialist market economy.