Germany’s small and medium-sized enterprises（SME）have contributed considerably to economic growth，and many other countries regard them as a successful model. Yet at times of industrial transformation they are also facing challenges. Against the background of Industry 4.0，the federal government has taken a series of measures to further the development of SMEs in order to stimulate their innovative potential and continue to let Germany play a leading part in the new industrial revolution. After exploring the government’s supporting policies，this paper finds that they aim at meeting the challenges facing SMEs in the era of Industry 4.0，including a low level of digitalization，a decreasing capacity for innovation and a dearth of financing channels. The federal government emphasizes the role of professional intermediary organizations and encourages capital to be invested in innovation-oriented SMEs. These policies，including a timely re-balancing of the relationship between SMEs and large enterprises，a combination of policies to support SMEs with innovation policies and facilitating investment possibilities in SMEs for private capital could be a useful model for China.