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

40 Pages Posted: 4 Aug 2020 Last revised: 22 Sep 2020

See all articles by Joy Chen

Joy Chen

Cheung Kong Graduate School of Business

Zijun Cheng

Peking University - China Center for Economic Research (CCER)

Kaiji Gong

HKUST Business School

Jinlin Li

Peking University - China Center for Economic Research

Date Written: September 22, 2020

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, 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.

Keywords: COVID-19, Policy, China, SME

JEL Classification: D22, H71, H81, L23

Suggested Citation

Chen, Joy and Cheng, Zijun and Gong, Kaiji and Li, Jinlin, Riding Out the COVID-19 Storm: How Government Policies Affect SMEs in China (September 22, 2020). Available at SSRN: https://ssrn.com/abstract=3660232 or http://dx.doi.org/10.2139/ssrn.3660232

Joy Chen

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China

Zijun Cheng

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China

Kaiji Gong (Contact Author)

HKUST Business School ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Jinlin Li

Peking University - China Center for Economic Research ( email )

Beijing, 100871
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
494
Abstract Views
2,365
rank
73,769
PlumX Metrics