Small and medium-sized enterprises (SMEs) are ubiquitous in China, notes Lufax Holding, a leading technology-enabled personal financial services platform in China.
According to the National Bureau of Statistics and the State Administration of Market Regulation, whose definition of SMEs depends to some extent on the type of business conducted, there were approximately 143.5 million SMEs in China at the end of 2021
Of that total, 40.3 million were organized as legal entities and 103.2 million were operated by sole proprietors.
SMEs generally have small-scale operations, with fewer than 50 people and less than RMB30 million in annual revenue, and are dispersed across a wide range of industries and geographies.
They also have an average lifespan of less than five years.
Also, SMEs generally lack pledged collateral or steady cash flow, given their small scale and short lifespan.
SMEs
SME owners include both legal entity owners and individuals who run their businesses as sole proprietors.
They often own and operate several SMEs, either consecutively or simultaneously, in the same or related sectors and at different stages of their life cycle.
As individuals, small business owners (SBOs) can have a much stronger credit profile than their companies, with real estate, automobiles or other personal assets.
By the end of 2021, the number of SBOs in China reached 119.6 million.
Overall, SMEs are the backbone of the Chinese economy and enjoy strong domestic political support.
SMEs are responsible for more than 60% of China’s GDP, more than 80% of job creation and about 60% of its exports in 2021.
The Chinese government uses various policy tools to promote SME development, including the adoption of favorable policies such as innovation incentives, tax preferences and financing support.
Lufax Holding primarily addresses the unmet demand for personal loans among small business owners and salaried workers in China through its retail credit facilitation business, and provides wealth management solutions to China’s middle class and affluent population through its wealth management business.
As of December 31, 2021, its total facilitated retail credit balance reached RMB661 billion (US$103.7 billion), and total customer assets generated through its online wealth management platform reached RMB432.7 billion (US$67.9 billion).
