Market Reforms,Technological Capabilities and the Performance of Small Enterprises in China

This paper shows that the domestic and foreign trade liberalization of the Chinese economy since the late 1970s has led to much dynamism among small and medium firms. Such firms have grown at a rapid pace and have increased their share of value added in the Chinese economy. At the same time, they have recorded gains in total factor productivity. However, after two decades of decontrol, the potential for further growth among small and medium industries is limited unless further liberalization is undertaken and government policies pertaining to the allocation of credit, levy of taxes, and grants of research and other subsidies are applied in a more even-handed fashion.