Government procurement undertakes the policy function of promoting the development of small and medium-sized enterprises (SMEs). Therefore, this article examines listed companies from China’s entrepreneurship and science and innovation editions between 2015 and 2022 to investigate whether government procurement can alleviate the under-investment faced by SMEs. The findings indicate that government procurement significantly mitigates the under-investment issues faced by SMEs. From a heterogeneity perspective, it is observed that the mitigating eff ect of government procurement on SMEs under-investment is particularly pronounced during periods of high economic policy uncertainty, in regions with low levels of digital fi nance development, and among SMEs with lower market positions. Further research reveals that government procurement alleviates SMEs under-investment primarily by easing financing constraints and reducing operational risks for these enterprises. The research presented in this article holds substantial signifi cance for enhancing the eff ectiveness of government procurement policies and fostering high-quality development within SMEs.