Small and Medium Enterprises (SMEs) and Sustainable Development in China: Opportunities, Challenges, and Future Directions

Abstract

Small and Medium Enterprises (SMEs) are foundational to China’s economic structure and its transition toward high-quality, innovation-driven, and greener growth. This paper offers a comprehensive, up-to-date synthesis of SMEs’ contributions, the evolving policy environment, and the practical opportunities and constraints that shape their sustainability trajectories. Drawing on peer-reviewed studies, Chinese government communications, and international policy reports (2015–2025), we analyze how SMEs in China advance sustainable development through digitalization, green innovation, and integration into domestic and global value chains. We highlight recent national initiatives—such as the expansion of cross-border e-commerce comprehensive pilot zones and support for 'specialized and sophisticated “little giant”' firms—and discuss persistent gaps in financing, digital capabilities, intellectual property protection, and uneven regional development. The paper concludes with evidence-based recommendations on finance diversification, targeted digital and green capability building, and cluster-based strategies to enhance resilience and sustainability performance.