Introduction

The last 20 years have seen the rapid development of small- and medium-sized enterprises (SMEs) in the People's Republic of China (PRC). In 2003, the PRC issued The Interim Regulations on Small and Medium Enterprises Categorizing Criteria, which officially established the criteria for categorizing SMEs. For the industrial sector, SMEs are defined as those entities that employ less than 2,000 people, have annual revenue less than CNY300 million, or total assets less than CNY400 million.

Regarding the SME data used in this paper, the author compiled the data of all private enterprises referred to as SMEs. At present, there is no complete data series for SMEs, and so the data of private SMEs will serve to help explain the impacts of the global financial crisis on SMEs in the PRC. There are three points to explain as follows:

First, The Interim Regulations on Small and Medium Enterprises Categorizing Criteria (NDRC 2003) clearly defines what constitutes a SME. Table 1 [ PDF 34.6KB | 1 page ] provides a summary of the SME Categorization Criteria. However, the data for formal SMEs alone only reflects data for SMEs in the PRC from 2004 to 2007. Furthermore, these SMEs only include upscale enterprises with annual revenue in excess of CNY5 million. For example, in 2007 there were 330,000 formal SMEs, but the total number of SMEs including formal and informal SMEs was actually 33 million. Prior to the promulgation of the The Interim Regulations on Small and Medium Enterprises Categorizing Criteria (NDRC 2003), research was based mainly on indicators that private enterprises needed for analysis. SMEs are the main component of private enterprises as an economic group, and so the state of private enterprise development basically reflects the situation of SMEs.

Second, private enterprises include three types of enterprises, classified by the number employees hired. The first type is micro-small private enterprises that employ up to a maximum of 8 people. The second type is small and medium private enterprises with less than 2,000 employees, or with annual revenues under CNY300 million, or with total assets under CNY400 million. The third type is large private enterprises, which are businesses that employ more than 2,000 people, have annual revenue in excess of CNY300 million and total assets in excess of CNY 400 million. For example, in 2007, there were 27.59 million micro-small private enterprises, 5.51 million small and medium private enterprises, and only 2,950 large private enterprises.

Third, state-owned enterprises and foreign enterprises were not included in this paper, because all state-owned enterprises in the PRC are large and super-large enterprises.

There are another three points that need to be explained about the relationship between large private enterprises and SMEs. First, the ratio of 2,950 large private enterprises to total private enterprises in 2007 is irrelevant because the ratio is so tiny. The number of employees at the large private enterprises (6.71 million people) compared to all employees of private enterprises (127.49 million people) is 5.3%, and the ratio of the registered capital between the two types of enterprises is less than 10.0%. Furthermore, the ratio of total revenue of large private enterprises (CNY92.5 billion) to all private enterprises (CNY296.9 billion) is about 30.0%. Second, the fluctuation trend of the impacts of the global financial crisis on SMEs was totally reflected by that of all private enterprises. Obviously, the impacts of the financial crisis on the exports of SMEs would be more profound if the 2,950 large private enterprises were excluded from all private enterprises.

SMEs are playing an increasingly large role in the PRC economy. In 2008, SMEs accounted for 58.5% of the PRC's gross domestic product (GDP), 74.7% of industrial new value added, 58.9% of sales, 46.2% of tax revenue, and 62.3% of the total export values. In addition, 65% of patent technologies, 75% of technological innovation, and 82% of new products were developed by SMEs. Meanwhile, in 2008 the number of SMEs in the PRC reached over 42 million (around 38 million were macro-small private enterprises). SMEs accounted for 99% of all business enterprises in the PRC, employing 75% of urban dwellers and over 75% of the laborers transferred from rural areas.

However, SMEs' problems such as financing difficulty, poor technology levels, low creditability, and extensive management patterns have been bottlenecks in the course of their development. The current global financial crisis has exacerbated the problems of SMEs in the PRC despite a number of boosting policies developed by the government.

The purpose of this paper is to make a comparative analysis of the impacts of the 1997 Asian financial crisis and the current global financial crisis on SMEs and make suggestions for current PRC policies. There are four parts to this paper. Part I introduces and analyzes the impacts of the 1997 Asian financial crisis on SMEs and the government's policies. Part II makes a preliminary analysis of the impacts of the current financial crisis on the PRC's SMEs. Part III discusses the current SMEs support policies in the PRC, and Part IV puts forward relevant policy recommendations.

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