Almost every briefing document on small and medium-sized enterprises (SMEs) opens with that familiar set of numbers: SMEs contribute 50% of China's tax revenue, 60% of GDP, 70% of technological innovation, 80% of employment, and more than 90% of all enterprises. This "56789" has been repeated by the media, officials, and entrepreneurs for nearly a decade.
I don't object to the numbers — in fact, after 20 years in this field, I know the ratios are broadly accurate. What increasingly worries me is this: once an important matter gets reduced to a slogan, it tends to be treated as an "explanation" rather than a "problem."
One. The Simplified "56789"
The biggest problem with "56789" is that it creates the impression that SMEs are a "part" — 50% or 80% of the whole economy, rather than the economy itself. So in policy language, SMEs often end up in the "other" column: first come the "chain leaders," then the "supporting suppliers"; first the "main body," then the "supplement."
But if you walk into any industrial town in Shunde, you'll find that without the small factories whose names you can't even recall, the chain-leading enterprises can't ship a single finished product.
SMEs are not "part of" the economy. SMEs are the economy itself. Large enterprises are the iceberg above the waterline; SMEs are the much larger mass below. Whether that submerged mass is freezing, melting, or drifting determines what happens to the small tip on top.
Two. What Is the "1"?
So I want to suggest a supplementary formulation: SMEs are the "1," and "56789" is merely several of its projections.
What does "1" mean? It means that if China is to modernize, its smallest units — those factories of two or three hundred workers, those design firms of a dozen people, those trading offices of just a handful — must also be able to survive cycles, accumulate technology, take part in going global, and be treated well.
Without this "1," no number of zeros added behind it amounts to anything.
Three. Employment, Supply Chains, the Capillaries of Society
Over the past five years, I've hosted a great many government officials, academics, and overseas delegations at the Promotion Association. I've noticed a common blind spot: when people discuss SMEs, what they have in mind is "financing difficulty, financing expense," at most with a line about "insufficient innovation capacity."
But what I want to say is this: the greatest significance of SMEs to society lies neither in finance nor in innovation — it lies in employment, in supply-chain resilience, and in their role as the capillaries of society.
The street-level economy of a mid-sized city, the tax structure of a prefecture-level city, the consumption capacity of a county — their foundation is SMEs. When SMEs shut down, downsize, and retreat on a large scale, what's lost is not just GDP, but the warmth in every nerve ending of society.
Four. The Structural Pressures of 2025
Most of the proposals I submitted at the third session of the Guangdong Provincial People's Congress in 2025 had to do with SME cash flow: overdue receivables, R&D investment recovery cycles, the sunk costs of digitalization.
None of these are new problems. But in the context of a stock economy, they have become especially acute. In the past, SMEs could "let growth mask the flaws." They can't anymore. Every seemingly minor cost item gets magnified on the next quarter's books.
Five. For Policymakers, Entrepreneurs, and Observers
To policymakers: don't look only at the numbers of firms being "upgraded to scale"; look at how the ones that don't upgrade manage to survive.
To entrepreneurs: don't look only at your large clients; look at how the smallest link in your supply chain is doing.
To observers: don't treat "SMEs" as a single aggregate social problem. Treat them as individual workshops, individual payroll sheets, individual decisions.
The "1" is that kind of unit. It is only starting from "1" that China's economy acquires a real scale of measurement.
Originally published in the "Economic Observer · The Walker’s View" column. The author is Executive President of the Guangdong SME Development Promotion Association. For reprints or citations, please contact the author or the Association Secretariat.