Small-and medium-sized enterprises (SMEs) in China account for 68 percent of all Chinese exports, a share that is much higher than in other countries. Since Chinese exports are growing twice as fast as the economy itself - in terms of GDP - the Chinese SMEs are responsible for a large portion of this growth. This is discussed by the Australian economist, Chris Hall, in an article in the current issue of  CESifo Forum, which is published by one of Germany's top economic institutes, the Ifo Institute.

    Most SMEs have only been established in the past decade; the total number is estimated to be 40 million. This compares with a figure of about 19 million SMEs in Europe (European Commission 2003) which includes micro-firms and self-employed, and about 6 million in the US, or about 16 million if self employed people are included - a combined total of 35 million.

    Professor Hall asks: What international contribution do the SMEs make to the Chinese economy? The official Chinese estimates of the contribution of SMEs to exports are set out in Table 1. These show that from 2002, the first year that SME exports were separately identified, SMEs contributed 62 percent of exports, growing to 68 percent in 2005. To put this in context, Chinese SME exports were USD 518 billion in 2005, or equivalent to about double the total GDP of Greece, and about one quarter of the total GDP of France.

    These exporting Chinese SMEs include some firms which are quite large relative to the normal definition of an SME in Europe or the US and include firms which are not just privately owned firms.

    However the same is true in Europe or the US, and neither of those countries has accurate figures on the level of SME exports at an international level either. What figures there are (and ignoring interstate trade) probably suggest that SME exports are less than 30 percent of all exports in the US and Europe. European figures are hard to compare, because they often contain a lot of intra-European trade, so comparable only to beer being shipped from Shandong to Yunnan, or bourbon from Kentucky to California. However, a rough gauge can be obtained from the European Commission (2002) which estimated that European SMEs derive only 13 percent of their turnover from exports. The US Department of Commerce estimated that about 30 percent of US exports come from SMEs. In rough terms, Chinese SMEs are more than twice as internationalised as those US counterparts, and more than five times as internationalised as European SMEs.

    Hall says that SMEs in Europe and the US make up about half of any local or national economy (in employment and value added terms), but historically their contribution to the international economy has been much smaller.

    SMEs only make up about 30 percent of trade across borders, and about 10 percent of international investment. SMEs contribute disproportionately to net job creation: SMEs contribute about 70 percent of net new jobs, while larger firms tend to be job destroyers.