BEIJING, Jan. 15 (Xinhua) -- Small and medium-sized enterprises (SMEs) in China reported better operation conditions last month, according to an industrial group.

The China Association of Small and Medium Enterprises said that its monthly index tracking the performance of 3,000 SMEs from eight major sectors gained for the second straight month to 86.4 in December, up from 86.3 in November and 86.1 in October.

The association added that the development of SMEs in December featured recovering market expectations, curbed cost increases, stable employment, and improved investment sentiments.

Recent favorable government policies for SMEs, including tax breaks and financial support, helped bolster industrial and supply chains, the association said.

The sub-indexes of industry, construction, transportation and postal services, real estate, and social services rose from a month ago, while those for wholesale and retail and computer software declined. The sub-index of accommodation and catering remained flat.

Despite the improvement last month, the association warned that SMEs still face multiple challenges ranging from the COVID-19 pandemic to financing difficulties and high logistic costs.

All the eight sectors stayed below the boom-bust line of 100, with accommodation and catering at the lowest notch, and the current headline index was still lower than that in the same period of 2020 and 2019, the association said, adding that the business confidence of SMEs was unstable.

The Chinese government has vowed to ramp up measures from inclusive loans to tax reductions in an effort to further help small market players weather out the economic hardships this year.