State promotion of SME development at the local level in China: An examination of two cases

The purpose of this paper is to examine state promotion of private sector development in China, with particular emphasis on local configurations of support and service provision.

Via analysis of two cases, constraints on the development of small‐ to medium‐sized enterprise (SME) support and enabling environments and infrastructures are explored.

The cases highlight several fundamental constraints to state support for private sector development, including: an under‐developed market for business development and other support services; lack of budgetary facility in municipalities to resource publicly supported services to private SMEs; a lack of expertise within local government to develop mechanisms to engage with and support the development of privately owned enterprises.

The localised nature of implementation of the 2003 SME Promotion Law, at municipal and county level, appears to be a constraint on systematic development of comprehensive SME support systems, as mandated by this law.

First, the private sector has grown without emergence of a purposive infrastructure of direct state support to enable this development, which appears to be a positive outcome from reform. Second, future private sector growth may be constrained should local government not develop mechanisms to engage with the private sector to enable its continued growth and development.

The paper offers insight into current, and future, relations state promotion of enterprise in China.