Financing SMEs and Entrepreneurs 2026: China
Table of contents
In China, SMEs play a key role in maintaining economic dynamism and boosting innovation and entrepreneurship. SMEs contribute approximately 50% of tax revenue, 60% of GDP, 70% of technological innovation, and 80% of urban employment. In 2024, there were about 60 million SMEs in China, and the number of newly registered enterprises reached an average of 24 000 per day.
Outstanding business loans for Micro and Small Enterprises (MSEs) increased to CNY 81.4 trillion in 2024, up 14.8% from 2023. The share of outstanding business loans for MSEs has been relatively stable for the past two years, at 51% in 2023 and 53.66% in 2024, respectively. Over 2022-23, the ratio of short-term loans to total loans for SMEs declined from 43.1% to 42.68%. This ratio dropped to 42.49%, down 0.19 percentage points in 2024.
In 2024, interest rates for SMEs and large firms were 4.18% and 3.78%, down 0.28 and 0.43 percentage points, respectively, compared to 2023. The interest rate spread between SMEs and large enterprises continued to increase, rising from 0.25% to 0.40% in 2023–24. This represents the fifth consecutive year of spread expansion since 2020. In recent years, China has improved and implemented the policy of cutting taxes and fees on debt finance. In 2024, SMEs were on average charged 1.27% of the total value of bank loans in the form of extra loan fees, which have decreased slightly by 0.28 percentage points with respect to the previous year. In 2024, the 1-year interest rate in the shadow banking sector ranged from 9.11% - 13.02%, with a spread of about 4.93% - 8.84% compared to formal bank loans.
In 2024, the rejection rate of SME loan applications was stable at around 4.71%, and the utilisation rate of SME bank loans has remained at a high rate of 85.95%. On average, 57.13% of SMEs have applied for a bank loan.
In 2024, newly listed SMEs obtained CNY 13.15 billion from the STAR Market, CNY 22.58 billion from the Shenzhen Venture Board, and CNY 5.02 billion from the Beijing Stock Exchange, down by 90.94%, 81.54%, and 67.47% respectively compared to the previous year. Venture capital, leasing and factoring, online lending and crowdfunding continue to remain important sources of SME financing.
In 2024, the ratio of non-performing loans to total MSE loans was 1.64%, down 0.37 percentage points from 2023.The bankruptcy rate for SMEs was 3.72% in 2024 according to survey data, up 4.79% from the previous year.
In September 2024, the national small and medium-sized enterprise development fund reached CNY 35.7 billion, and a total of 42 sub-funds were set up, covering more than 1,200 growth-oriented enterprises in the seed and start-up stages. In 2024, the annual re-guarantee business scale of the National Financing Guarantee Fund reached CNY 1.41 trillion, an increase of 7.6 % year-on-year. The central government has issued a special fund of CNY 3.059 billion for the development of small and medium-sized enterprises, focusing on supporting ' little giant ' enterprises1 to invest in scientific and technological innovation and industrial chain collaboration.
In 2024, the Chinese government has continued to alleviate financing difficulties and reduce costs for SMEs, including tax and fee reduction, subsidies, financing guarantees, expansion of financing channels, improving financial services, and enhancing the connection between industry and finance. At the same time, China will broaden multiple financing channels and consolidate the role of small and medium-sized enterprises as a pillar of economic stability.
In 2024, the world economy experienced steady growth with indications of a recovering global trade, though it was not impervious to uncertainties such as geopolitical shocks and trade protectionism. China's economy, while in a critical phase of recovery, maintained its fundamental trend of stable long-term growth.
The banking industry, accurately understanding the underlying laws and new characteristics of money and credit demand and supply, placed greater emphasis on enhancing quality and efficiency. It provided more targeted and robust financial support for the real economy, adhering to the overarching principle of moderate aggregate demand, a steady pace, and the effective utilisation of idle funds.
SMEs play a key role in maintaining economic dynamism and boosting innovation and entrepreneurship. SMEs in China contribute approximately 50% of tax revenue, 60% of GDP, 70% of technological innovation, and 80% of urban employment.
In 2024, there were about 60 million SMEs; the number of newly registered enterprises reached an average of 24 000 per day, and the annual operating income of SMEs above the designated size 22exceeded CNY 81 trillion.
In recent years, China has gradually expanded the coverage of loans for Micro and Small Enterprises (MSEs). The outstanding business loans for Micro and Small Enterprises (MSEs) increased to CNY 81.4 trillion in 2024, up 14.8% from 2023. The share of outstanding business loans for MSEs has steadily increased, reaching 51% in 2023 and 53.66% in 2024, respectively.
In 2024, the proportion of small and medium-sized enterprises (SMEs) applying for bank loans accounted for 57.13%, a decrease of 1.46 percentage points from the previous year. Short-term loans have remained the preferred financing method for SMEs. In the 2022-23 period, the proportion of short-term loans to total loans for SMEs decreased from 43.1% to 42.68%. This proportion further decreased to 42.49% in 2024, a drop of 0.19 percentage points.
In 2024, China implemented several measures to foster the growth of inclusive finance, focusing on expanding its scale, enhancing coverage, and reducing costs. The People's Bank of China broadened the scope of support for the inclusive micro and small enterprise loan programme, raising the maximum single-entity credit line from CNY 10 million to CNY 20 million. Additionally, it increased quotas for relending and rediscounting aimed at SMEs. The National Financial Regulatory Administration and the National Development and Reform Commission spearheaded the creation of a co-ordinated working mechanism to back the financing of micro and small enterprises. Local mechanisms were established to tackle the financing challenges faced by small businesses and lending obstacles for banks by synchronising efforts from both supply and demand perspectives.
In 2024, the People's Bank of China reduced the required reserve ratio twice, cumulatively by 1 percentage point, and cut central bank policy interest rates twice, cumulatively by 0.3 percentage points. The bank persisted in deepening the reform of marketisation for loan interest rates. On October 20, 2024, the one-year LPR fell to 3.1%, and the over-five-year LPR decreased to 3.6%.
In 2024, the interest rates for SMEs and large firms were 4.18% and 3.78%, respectively, marking decreases of 0.28 and 0.43 percentage points from 2023. The interest rates for SMEs were higher than those for large firms; the interest rate spread between SMEs and large enterprises was positive, increasing from 0.25% in 2023 to 0.4% in 2024. Consequently, in recent years, the interest rates for large firms have decreased at a faster rate than those for SMEs.
In 2024, SMEs were on average charged 1.27% of the total value of bank loans in the form of extra loan fees, which have decreased slightly by 0.28 percentage points with respect to the previous year. In 2024, the primary policies supporting technological innovation and manufacturing development resulted in tax cuts, fee reductions, and rebates amounting to CNY 2.6 trillion, with small and medium-sized enterprises (SMEs) and individual businesses being the primary beneficiaries.
Collateral requirements pose a significant constraint for small and medium-sized enterprises (SMEs) seeking bank loans. Between 2022 and 2023, the proportion of bank loans to SMEs secured by collateral has consistently decreased from 45.3% to 41.9%, a reduction of 3.4 percentage points. Surveys from the demand side indicate that this ratio remains elevated for SMEs in comparison to larger corporations. Nevertheless, the ongoing reduction in this percentage suggests that the challenges SMEs face concerning collateral requirements may be evolving.
In 2024, structural monetary policy persisted in concentrating on the transformation of the economic structure and support for weak links to balance the objectives of steady growth and risk prevention. Overall, the credit conditions of small and medium-sized enterprises (SMEs) have improved. Additionally, the rejection rate for SME loan applications remained stable at approximately 4.71%, and the utilisation rate of SME bank loans has stayed high at 85.95%.
In 2023, China fully implemented the stock issuance registration-based reform. In 2024, China's multi-tier capital market system continued to improve, with the traditional mainboards of Shanghai and Shenzhen primarily serving mature large enterprises; the Science and Technology Innovation Board (STAR Market) highlighting technological characteristics; the Venture Board mainly serving growth-oriented innovation and entrepreneurship enterprises; and the Beijing Stock Exchange and National Equities Exchange and Quotations (NEEQ) serving SMEs.
In 2024, newly listed SMEs obtained CNY 13.15 billion from the STAR Market, CNY 22.58 billion from the Shenzhen Venture Board, and CNY 5.02 billion from the Beijing Stock Exchange, down by 90.94%, 81.54%, and 67.47% respectively compared to the previous year. In total, 15 small companies were listed on the STAR Market, 38 on the Venture Board, and 24 small companies were listed on the Beijing Stock Exchange in 2024, down 75.81%, 65.45%, and 69.23% respectively compared to the previous year.
In 2024, the total number of listed companies on the NEEQ was 6 101, down 2.24%, compared to 2023, and the total transaction amount decreased by 26.43% compared with 2023, reaching CNY 45.1 billion. The total amount of stocks raised by listed companies throughout the year was CNY 11.9 billion compared to CNY 18.0 billion in 2023.
Source: official website of National Equities Exchange and Quotations (NEEQ), http://www.neeq.com.cn.
In recent years, venture capital has remained an important source of financing for SMEs and entrepreneurship. However, the dynamism of China's venture capital market has experienced volatility. By 2023, the number of venture capital institutions in China had reached 4 117, marking an increase of 47 or 1.2% from 2022. The total venture capital investment stock amounted to CNY 881.93 billion in 2023, which was a 9.86% increase compared to 2022. Within this, CNY 79.16 billion was incremental VC investment, showing a slight year-over-year increase but a 21.7% decrease from 2021.
As of the end of June 2024, China's financial leasing contracts had a balance of approximately CNY 56.06 trillion.
Commercial factoring has played a significant role in addressing the financing difficulties of SMEs. In 2024, China issued industry group standards for commercial factoring. The total factoring volume was about EUR 679.0 billion, up 7.00% compared to 2023.
In 2024, the scale of shadow banking in China remained generally stable, with standardised and orderly credit intermediation and maturity transformation functions, stable and controllable leverage conditions, effectively supporting the real economy. According to Moody's, the broad shadow banking assets rose to CNY 53.3 trillion in 2024 from CNY 49.0 trillion in 2023.
The Wenzhou Private Financing Index, which has been published since 2012, serves as a barometer for the regional and national private financing market. In 2023, the Wenzhou Private Financing Index improved the quality of its data reporting and officially launched Version 2.0. In 2024, the interest rate for 1-year private loans ranged between 9.11% and 13.02%, compared to the 12.04%- 17.27% range in 2023. The private lending rate, on average, exceeds the formal bank lending rate by 6.4%.
In 2024, the ratio of non-performing loans to total micro and small enterprise (MSE) loans was 1.64%, a decrease of 0.37 percentage points from 2023. The ratio of non-performing loans to total business loans was 1.54% in 2023, 0.1 percentage point lower than the ratio of non-performing loans to total MSE loans. Finally, according to survey data, the bankruptcy rate for small and medium-sized enterprises (SMEs) was 3.72% in 2024, an increase of 0.17% from the previous year.
In 2024, the Chinese government continued to intensify its efforts to alleviate the financing difficulties and high financing costs faced by small and medium-sized enterprises. Specific measures implemented include tax and fee reductions, the provision of subsidies, the strengthening of government financing guarantees, the expansion of financing channels, the optimisation of financial services, and the promotion of digital integration between industry and finance. China has also executed a special plan to address the overdue debts of small and medium-sized enterprises, with a focus on the development of technology-based small and medium-sized enterprises. The primary policy responses and adjustments are listed below: :
On January 24, the People's Bank of China expanded the scope of support for inclusive small and micro loan support tools, increasing the maximum household credit from CNY 10 million to CNY 20 million. The bank also continued the implementation of inclusive pension special re-loans and appropriately raised the amount of re-loans and rediscounts available to support small and micro loans.
On February 5, the People's Bank of China reduced the deposit reserve ratio of financial institutions by 0.5 percentage points and injected approximately CNY 1 trillion of long-term funds to consolidate and enhance economic recovery.
On April 7, the People's Bank of China established a scientific and technological innovation and technological transformation re-loan facility with a quota of CNY 500 billion and an interest rate of 1.75%. The initiative aims to encourage and guide financial institutions to enhance their financial support for technology-based small and medium-sized enterprises, as well as for key areas of technological transformation and equipment renewal projects.
On September 27, the People's Bank of China once again reduced the deposit reserve ratio by 0.5 percentage points and estimated that it would inject approximately 1 trillion yuan of liquidity funds. This measure may be followed by further reductions of 0.25 to 0.5 percentage points during the year to maintain a reasonable level of liquidity.
On October 25, the People's Bank of China Credit Information Centre launched a new platform—the National Small and Medium-Sized Enterprise Capital Flow Credit Information Sharing Platform—to further support the financing of small and medium-sized enterprises. This allows enterprises to opt to provide banks with more credit information, thereby enhancing financial institutions' willingness to issue loans.
In recent years, China has bolstered its policy support for small and medium-sized enterprises (SMEs). In 2020, the country established the National SME Development Fund Co., Ltd., the first national fund dedicated to the advancement of SMEs. By 2024, the fund had amassed over CNY 375 billion and had invested in more than 1,200 growth-oriented SMEs in their seed and start-up phases. Also in 2024, the National Financing Guarantee Fund provided CNY 1.41 trillion in re-guarantee services, marking a 7.6% increase from the previous year. This resulted in a total of 1.05 million SMEs benefiting from these services. Additionally, in 2024, the special funds allocated for the development of small and medium-sized enterprises surpassed CNY 3 billion.
Note: MSEs in these graphs refer to Micro- and Small-Enterprises.
References
China Institute for Small and Medium Enterprises of Zhejiang University of Technology (2024), “Demand-side survey on Chinese SME financing conditions in 2024”.
Chinese Academy of Science and Technology for Development, Ministry of Science and Technology of P. R. China (2024), “Venture Capital Development in China 2024”, Beijing: Scientific and Technical Documentation Press.
Financial Affairs of Wenzhou Municipal People’s Government (2025), “Monitoring of Wenzhou Private Finance Index”, http://www.wzpfi.gov.cn.
The People’s Bank of China, China Financial Institute (2025), “Almanac of China’s Finance and Banking in 2024”, Beijing: China’s Finance and banking Almanac Press.
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← 1. “Little Giant” Enterprises are high-quality small and medium-sized enterprises (SMEs) selected and recognized by the Ministry of Industry and Information Technology, which specialize in niche sectors, command a high market share, and boast strong innovative capacity and core technologies.
← 2. 2 The National Bureau of Statistics of China defines SMEs above the designated size as SMEs in the industrial sector with an annual main business income exceeding CNY 20 million.