Editor's note: Alexander Ayertey Odonkor, a special commentator on current affairs for CGTN, is a global economist with a keen interest in the social, environmental and economic landscape of both developing and developed countries, particularly in Asia, Africa and Europe. The article reflects the author's opinions and not necessarily the views of CGTN

According to the latest China Small and Medium Enterprise Confidence Index released by Standard Chartered, China's small and medium-sized enterprises (SMEs) sector ended 2024 on a strong footing. The index, which evaluates the status and development of China's SME sector based on three main sub-indexes, namely, credit, expectation and performance, showed activity picked up in December.

For the manufacturing sector, a cornerstone of the Chinese economy, the performance sub-index of manufacturing SMEs rebounded 2 points to 52.2 in December, rising to an eight-month high as sales, production and new orders remained resilient. On average, the performance sub-index picked up 0.6 point from Q3 to 51.3 in Q4, indicating further expansion in manufacturing activity. In another turnaround, the sales sub-index for cross-border trading SMEs edged up to its highest reading since April, showing resilient external demand.

Though there is still room for improvement – especially as the performance sub-indices of real estate and construction SMEs have acted as a key drag on the non-manufacturing index, their recovery to above-50 levels in December shows the encouraging outcome of enhanced policy support for SMEs.

As part of the efforts to eliminate constraints for SMEs' growth and enable them to expand markets, achieve new technological breakthroughs and develop new products, China has created a special relending facility worth 500 billion yuanto support science and technology innovation and technological transformation. Lack of access to capital is one of the daunting challenges faced by SMEs. Their inability to provide collateral often makes it difficult for them to access credit. China has therefore adopted various policy measures to provide solutions.

In recent years, Chinese lenders have leveraged digital technologies including artificial intelligence to mitigate risks and provide credit to SMEs. MyBank, China's first digital bank, a subsidiary of the Alibaba Group's Ant Financial Services, has provided credit to more than 53 million SMEs in China. 

Beyond bank loans, China encourages SMEs to take advantage of other sources of financing including venture capital and the capital market. In November 2021, the Beijing Stock Exchange was established, dedicated to the development of innovation-oriented SMEs, a major step in the effort to deepen capital market reforms and foster SME growth. The BSE helps SMEs to leverage cutting-edge technologies to produce novel products and supports innovation-oriented enterprises to go public. As of November last year, 257 firms were listed on the bourse with their combined market value exceeding 660 billion yuan. SMEs accounted for more than 80 percent of these listed companies.

The bourse plays a critical role in developing new quality productive forces – more than 80 percent of the funds raised by it was channeled to key and emerging industries including digital economy, green and low-carbon development, and new materials. Benefiting from enhanced policy support, the SME sector has become a major driver of China's science and technology innovation. According to the China National Intellectual Property Administration, of the valid invention patents held by SMEs in China in 2024, 75.3 percent are related to independently developed inventions, an increase of 3.9 percentage points compared to the previous year. The industrialization rate of valid invention patents held by SMEs was 55.1 percent, an increase of 3.6 percentage points from the previous year.

Considering technological innovation is linked with productivity and economic diversification, innovation-driven growth in the SME sector is critical to unlock new growth opportunities across industry and society. As China nurtures new quality productive forces, shifting to advanced productivity freed from the traditional economic growth models and emphasizing innovation, SMEs should be empowered to unlock the full potential of the sector.

Known to account for 50 percent of the nation’s tax revenue, 60 percent of GDP, 70 percent of national technological innovation and 80 percent of urban employment, China's SMEs remain the engine of economic growth and social development. Supported by innovation-led growth in the SME sector, the Chinese economy has demonstrated remarkable resilience and adaptability, amid profound global and domestic challenges.

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