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

Joy Chen (), Zijun Cheng (), Robin Kaiji Gong () and Jinlin Li ()
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Joy Chen: Cheung Kong Graduate School of Business
Zijun Cheng: National School of Development, Peking University
Robin Kaiji Gong: Department of Economics, Hong Kong University of Science and Technology
Jinlin Li: National School of Development, Peking University and Harvard Kennedy School

No 202006, HKUST CEP Working Papers Series from HKUST Center for Economic Policy

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 (search for similar items in EconPapers)
JEL-codes: D22 H71 H81 L23 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-cna, nep-cse, nep-ent and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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