"That the government is implementing such a law suggests that it is trying to improve the investment environment and business operations for SMEs and provide them with the same judicial protection as State-owned enterprises (SOEs) enjoy," said Li Xiaochao of the National Bureau of Statistics.

The government is also trying to increase financial assistance and provide favourable policies on taxation to encourage SMEs, said Li, deputy director of the bureau's comprehensive statistics department.

"This will undoubtedly help increase entrepreneurs' confidence and regularize the market," he said.

A survey by the State Information Centre and China Entrepreneurs Survey System suggests that China had 29.2 million SMEs by the end of 2001, employing 174 million people and generating more than 50 per cent of the country's gross domestic product.

The SMEs also contributed about 60 per cent of the country's exports and 43.2 per cent of its tax revenue.

"The further development of SMEs will help ease unemployment pressure, which has been a problem for the government during the process of the country's fast economic development," said Niu Li, a senior economist with the State Information Centre.

China's SMEs have enormous opportunities, now that China has become a member of the World Trade Organization.

The government has already promised to open up important markets such as telecommunications, retail business and banking to both foreign investment and SMEs, said Hu Shaowei, another senior economist with the centre.

The reduction or removal of the restrictions on SMEs will help these companies more freely participate in the ongoing economic restructuring, expand their share of foreign trade, gain access to foreign funds and increase exchanges with international enterprises and with research and development institutions.

"We hope SMEs will grow rapidly and infuse greater vitality into China's social and economic development," he said.

But the three agreed that the translation of law into reality is no easy task in the short run.

SMEs also have certain "congenital deficiencies" such as vaguely defined property rights, a lack of funds and technology, limited scale and capabilities, and inadequately developed internal management mechanisms.

(China Daily July 9, 2002)