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Riding Out the COVID-19 Storm: How Government Policies Affect SMEs in China


  • Joy Chen

    (Cheung Kong Graduate School of Business)

  • Zijun Cheng

    (National School of Development, Peking University)

  • Robin Kaiji Gong

    (Department of Economics, Hong Kong University of Science and Technology)

  • Jinlin Li

    (National School of Development, Peking University and Harvard Kennedy School)


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, 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. Second, stabilization 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. Last, 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. Our findings shed new light on the policy debates on supporting SMEs during the COVID-19 pandemic.

Suggested Citation

  • Joy Chen & Zijun Cheng & Robin Kaiji Gong & Jinlin Li, 2020. "Riding Out the COVID-19 Storm: How Government Policies Affect SMEs in China," HKUST CEP Working Papers Series 202006, HKUST Center for Economic Policy.
  • Handle: RePEc:hke:wpaper:wp2020-06

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    References listed on IDEAS

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    More about this item


    COVID-19; Policy; China; SME;
    All these keywords.

    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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