How Do Private Small-Medium Enterprises Contribute to the Local Economy in China - Zhejiang Province - Dissertation Example

On top of the number of employees employed, another qualification of SMEs should not have an annual turnover of more than €50 million (European Commission, 2013).
In China, the definition, guidelines, and classification of SMEs were based on its “2003 SME Promotion Law” (Liu, 2008, p. 38). For example, the guidelines for the medium-sized wholesaler is to employ between 100 to 200 employees and earn revenue between RMB30 million to 300 million each year. On the other hand, for a wholesaler to be classified as small-scale, the firm should employ less than 100 (<100) employees and earn less than RMB30 million each year (Lei, 2008; Liu, 2008). In general, SMEs in China are those enterprises that employ between 300 to 2,000 employees with a total sales of 30 to 300 million yuan each year and a total “assets worth 40 to 400 million yuan” (Nan and Jin, 2010). (See Appendix I – Definition and Classification of SMEs in China on page 67)
Back in 1978, China decided to move from a state-controlled economy towards a market-oriented economy (Tisdell, 2009; Chow, 2004; Liang, Guo and Wang, 2004; Poutziouris, Wang and Chan, 2002). Ever since China opened its economy worldwide, the private SMEs in this country has undergone rapid and sustainable economic growth (Liu, 2008). Today, private SMEs in China play a significant role in its economic and employment development (Chinese Government's Official Web Portal, 2013).
Contributing to 58.5% of China’s gross domestic product (GDP), 50% tax revenue, 68% exports, and 75% of new employees each year, the total number of SMEs in China as of 2012 has reached more than 4.3 million (Chinese Government's Official Web Portal, 2013; Ministry of Commerce - People's Republic of China, 2012). Because of the significant role of SMEs in China’s economic and employment development, its short- and long-term impact has a long time well been documented (Liu, 2008; Zhao, 2008; Poutziouris, Wang and Chan, 2002).
Because of the rapidly growing number of private SMEs in China, this study will purposely seek to determine the impact of private SMEs on China’s local economy.