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Riding out the COVID-19 storm: How government policies affect SMEs in China

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  • Chen, Joy
  • Cheng, Zijun
  • Gong, Robin Kaiji
  • Li, Jinlin

Abstract

Based on a nationally representative survey on SMEs in China, we study the impact of government policy interventions on SMEs during the COVID-19 pandemic. Our findings are three-fold. First, relief policies in the form of payment deferrals and exemptions significantly improve SMEs' cash flows and further stimulate their operational recovery. This effect is more pronounced for firms with larger shares of high-skilled employees. Second, financial support policies do not appear to be effective in alleviating SMEs' cash constraints or encouraging the reopening of small businesses, potentially due to difficulties in accessing policy-oriented loans and misallocation of credit. Last, regional and local lock-down policies decrease SMEs' incidence of reopening and delay their expected reopening in the near future, likely by reducing consumer demand. Our findings shed new light on the policy debates on supporting SMEs during the COVID-19 pandemic.

Suggested Citation

  • Chen, Joy & Cheng, Zijun & Gong, Robin Kaiji & Li, Jinlin, 2022. "Riding out the COVID-19 storm: How government policies affect SMEs in China," China Economic Review, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:chieco:v:75:y:2022:i:c:s1043951x2200089x
    DOI: 10.1016/j.chieco.2022.101831
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    11. Bruhn, Miriam & Demirguc-Kunt,Asli & Singer, Dorothe, 2023. "Government Support and Firm Performance during COVID-19," Policy Research Working Paper Series 10641, The World Bank.
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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