China’s micro, small, and medium-sized enterprises (MSMEs) are indispensable to the country’s green transition.
Accounting for over 99 per cent of enterprises, approximately 60 per cent of GDP and 80 per cent of urban employment, MSMEs must be active participants in China’s pursuit of carbon neutrality by 2060, not merely subjects of environmental regulation. At the same time, they are the enterprises most exposed to the direct costs of compliance, retrofitting, and adjustment, while being least equipped with the institutional resources to navigate the transition on their own.
As the title of the report indicates, it is China’s goal that the transition to a green and environmentally friendly economy be based on the principles of a “green and just” policy approach. Fundamentally, that means adopting a people-centered approach that ensures fairness, inclusivity and equity, leaving no one behind. It seeks to create more winners than losers by focusing on social equity, decent work and sustainable livelihoods. A just transition also seeks to address historical inequalities and exclusion to help build more resilient societies for future generations. The aim of this report is to propose a policy framework that meets these objectives.

The report provides a comprehensive diagnostic of China’s policy landscape for supporting the green and just transition of MSMEs. It applies the UNDP Regional Bureau for Asia and the Pacific MSME Just Transition Policy Diagnostic Framework, integrating seven MSME policy domains and five justice lenses. The policy domains are: business enabling environment; entrepreneurship development; access to finance; enterprise development services; innovation and technology; market access; and resilience to climate and nature shocks. The justice lenses are: recognitional, distributive, procedural, restorative and spatial justice. The research combines three sources of evidence: a systematic policy text analysis of 20 representative national and subnational instruments; a nationwide enterprise survey of 338 valid responses across five sectors; and in-depth case studies with 20 enterprises in eastern, central and western China.