SME Diversification and Corporate Management under China-Europe Trade Integration: A Framework for Sustainable Growth

Abstract

This paper examines corporate diversification and management practices among small and medium‑sized enterprises (SMEs) within China‑Europe trade integration. With bilateral trade reaching ~US$780 billion in 2025, SMEs face both opportunities and challenges in diversifying across Eurasia. Drawing on recent evidence, the study identifies three diversification pathways: product, geographic market, and supply chain diversification. While diversification enhances SME resilience during economic disruptions^__horizontally diversified firms show lower failure rates^__successful implementation demands sophisticated management capabilities that many SMEs lack due to resource constraints, governance weaknesses, and limited regulatory expertise. The paper analyzes key challenges confronting SME managers, including geopolitical tensions (e.g., the suspended EU‑China Comprehensive Agreement on Investment), heterogeneous European regulatory environments, and the trade‑off between diversification benefits and organizational complexity costs. Policy recommendations emphasize agile compliance monitoring, ESG‑integrated governance frameworks, and digital collaborative platforms to reduce diversification transaction costs for SMEs. This research contributes to the literature on SME internationalization amid geoeconomic fragmentation and offers actionable insights for managers and policymakers seeking sustainable growth under the China‑Europe trade and investment integration framework.