China's push to strengthen its SMEs is gaining momentum
Dan Steinbock says the health of the overall economy depends on a thriving entrepreneurial spirit
China is not known for its resilient small- and medium-sized enterprises - yet. Still, for July, the SMEs' PMI figure, which serves as an important indicator of the manufacturing sector, suggests that China's internal economic growth is gaining momentum. It surpassed the 50 threshold for the first time since April 2012.
These gains reflect a strong policy momentum by the central government to boost the role of SMEs in the Chinese economy.
Recently, Premier Li Keqiang noted that 1.68 million businesses were registered nationwide in the first half of the year, up almost 60 per cent year on year. Among them, almost 1.58 million were private businesses, which provided more than 10 million jobs.
Li's message on SMEs was clear: it is a great start, but much more remains to be done.
Unlike their predecessors, the new Chinese leadership knows only too well that SMEs are the true growth engine in most economies. Ever since the leadership transition, Li and his reformers have paid increasing attention to the Chinese business environment, SMEs and entrepreneurship.
Last autumn, the launch of the Shanghai free trade zone allowed SMEs in the city to enjoy a wider range of opportunities to upgrade and transform their industrial structures. In the past, many of these SMEs have been labour intensive, focusing on manufacturing. In the future, they hope to become more capital intensive, focusing on product quality and design.