Role and opportunities for SMEs under Belt and Road Initiative

Editor's note: Ma Xiaobai is a director and researcher at the Enterprises Research Institute of the Development Research Center under the State Council, China's cabinet. Yuan Yue is a PhD fellow at the Belt and Road Center of China's National Development and Reform Commission. The article reflects the authors' opinions and not necessarily the views of CGTN.

Since it was proposed over a decade ago, the Belt and Road Initiative (BRI) has become an international public good and a platform for global cooperation that transcends geographic boundaries, bridges cultural differences and integrates development needs. There have been various highlights from large-scale infrastructure projects to small-scale yet impactful livelihood initiatives. 

Particularly in the new phase of construction requiring meticulous efforts, small and medium-sized enterprises (SMEs) have become a driving force for promoting the high-quality development of Belt and Road cooperation. These enterprises are the lifeblood of economies and play an indispensable role in advancing trade and investment, facilitating technological cooperation, and improving people's livelihoods, owing to their flexibility, innovativeness and adaptability. How to seize the historical opportunity of the next "golden decade" to support the BRI has become a key issue for the future development of SMEs.

SMEs face multiple challenges and issues when participating in the BRI. To begin with, it is hard for them to effectively identify potential political, economic, social and environmental risks in target countries. They are unfamiliar with the industry policies, legal environments, cultural customs and more in target countries, which lead to increased compliance costs. 

Secondly, SMEs generally lack international management talents and experience, and some companies are at the middle or lower end of the global value chain. Without brands or international sales channels, they are always at a disadvantage when facing strong competition from transnational corporations. 

Thirdly, "going global" requires substantial financial support, but SMEs have limited access to financing. They find it particularly challenging to secure funds in international financial markets. 

Fourthly, large-scale projects such as infrastructure, energy and resource-related projects central to the BRI have long cycles and high investment demands, which are not areas of advantage for SMEs. In addition, issues like information asymmetry and insufficient understanding of policies often leave enterprises confused in their international expansion.

Despite these challenges, the next "golden decade" presents abundant opportunities for SMEs in BRI construction. 

Most BRI countries and regions are developing countries and emerging economies undergoing economic transformation and upgrading. This background presents new opportunities for SMEs. 

In particular, "small-scale yet impactful" livelihood projects possess vast market potential. As active innovators, SMEs are flexible, sensitive to market changes and capable of offering diverse products and services, enabling them to quickly adapt to changes in technologies and demand in international markets. 

Moreover, their strengths in small-batch manufacturing technology, multifunctional machinery, labor-intensive production and local material sourcing align well with the preferences of BRI countries. 

Although infrastructure construction is not a strong suit for SMEs, the trickle-down effect of these projects generates demand for a wide range of small and medium-sized projects. 

Through the division of labor based on specialization, service outsourcing and make-to-order strategy, SMEs can establish collaborative, innovative and mutually beneficial partnerships with large corporations that can undertake these projects. 

Therefore, it becomes possible for them to integrate into international markets. Furthermore, the increasing demand in international markets for new business forms and models offers SMEs opportunities to develop cross-border e-commerce, digital trade and service trade under the BRI, significantly lowering the cost and risk of their international market expansion.

Whether Chinese SMEs can fully develop in BRI-related projects concerns the advancements and effectiveness of the BRI. 

Firstly, it is important to support the establishment of overseas service systems for SMEs and promote the transformation from "global expansion of projects" to "global expansion of platforms".

The construction of overseas industrial zones and parks need to be strengthened to effectively pool resources and mitigate risks, thus encouraging SMEs to venture abroad and helping them better utilize global resources and markets. 

Secondly, efforts should be made to promote top-level design and policy support for "small-scale yet impactful" projects to assist SMEs in refining their offerings in niche sectors, enhancing their brand awareness and increasing their focus on channel development so that they can gradually move beyond being mere original equipment makers or OEMs, foster lasting competitiveness and become deeply integrated into global value chains.

Thirdly, it is essential to value collaborative development with central state-owned enterprises and large transnational corporations for greater economies of scale. 

SMEs can adopt a "follow-the-leader strategy" in choosing investment destinations and sectors to reduce risks, ultimately achieving the transformation and upgrading from "going global" to "steadily entering the global market".