The ongoing processes of globalization and informatization present significant challenges and opportunities for small and medium-sized manufacturing enterprises (SMEs). In this context, digitalization emerges as a pivotal force reshaping various facets of enterprise operations, management, and marketing. This paper does an exhaustive examination of the current application status of digitalization within China's SMEs, evaluating its impact on business performance and competitiveness while proposing effective coping mechanisms. Findings indicate that SMEs encounter common obstacles such as constrained investment budgets, limited technological awareness, talent shortages, and managerial reluctance to embrace the potential benefits of digitalization. To address these challenges, the study advocates for a range of coping strategies. These include maximizing the utilization of limited financial resources, establishing digital technology-enabled development platforms, enhancing awareness of emerging technologies, and fostering a culture that prioritizes data-centric decision-making. Implementation of these strategies empowers SMEs to bolster operational efficiency, augment data analysis capabilities, exercise tighter control over costs, and nurture a culture conducive to innovation. Consequently, SMEs can position themselves competitively amidst intense market competition. This study holds significant implications for the digital transformation endeavors of SMEs in China, offering actionable insights for policymakers and stakeholders. Additionally, it provides empirical evidence to inform the formulation of government policies aimed at fostering a conducive environment for SMEs' digitalization initiatives. Thus, it serves as a valuable guide for SMEs navigating the digital landscape, enabling them to achieve sustainable growth and resilience in an increasingly digitalized global economy.