Purpose

– This paper aims to explore the development and implementation of enterprise policy in China, and the emergence of intermediaries and local strategies designed to encourage SME development.

Design/methodology/approach

– The paper is based on interviews and workshops held with local and national government in 2003 and 2006, and informed by reference to and analysis of the policy and academic literature.

Findings

– The dynamics and nature of local implementation of national enterprise legislation are mapped out, indicating an interactive dynamic between central government directive, local government adoption and response, and localised dynamics of enterprise and economic development. This “three‐way” model provides a nuanced explanation of local implementation of national enterprise legislation.

Practical implications

– The framework can be used at the municipal level to understand how national enterprise legislation can be implemented. The framework also points to wider patterns of local implementation of national government legislation.

Originality/value

– The paper provides a detailed model of local policy implementation, using the SME Promotion Law as a specific case of legislation.