China’s small businesses in ‘urgent need’ of support to protect jobs and boost domestic demand, State Council says
- Small and medium-sized enterprises are the foundation of China’s economy, accounting for the vast majority of non-government jobs
- Alleviating hardships facing SMEs is now higher on government’s agenda, largely due to risks they pose to social stability and the country’s future development
Beijing moved this week to provide additional support for small businesses – one of the weak links in China’s domestic economy – as leaders attempt to balance an uneven economic recovery by shoring up employment and domestic demand.
The State Council, the country’s cabinet, demanded that local governments and financial institutions help small businesses, which account for the lion’s share of employment in the country but which continue to struggle from the effects of the coronavirus pandemic and a long-standing lack of access to adequate financing.
“The resilience of small and medium-sized enterprises (SMEs) are the foundation of the national economy. They, often privately owned, are the main part of government initiatives to protect market entities and employment,” said a statement issued after a small business work conference chaired by Vice-Premier Liu He on Thursday.
Small businesses accounted for about 80 per cent of the nation’s non-government employment at the end of 2019.
The lack of adequate financing and bureaucratic obstacles to doing business are decades-old problems for small businesses in China. Alleviating these problems has moved higher up the government’s agenda, largely because of the risks they pose to social stability and the country’s future development.
China is facing huge challenges and uncertainties. We must reserve policies to tackle the major concerns of the people and market entities
Activity among small businesses continued to expand in January but at a slower rate, with Standard Chartered Bank reporting on Wednesday that China’s small business index edged down to 52.3 from 52.7 last month. A rating over 50 represents business activity expanding. The survey’s expectation index also weakened due to the reimposition of coronavirus-related restrictions, rising costs and a lower export outlook for the second half of this year, the bank warned.
The monthly index is based on a survey of more than 500 small businesses nationwide.
Speaking at the State Council’s executive meeting on Wednesday, Premier Li Keqiang ordered ministries to bring forward measures to address the existing problems in the economy.
“Currently, China is facing huge challenges and uncertainties. We must reserve policies to tackle the major concerns of the people and market entities,” he said.
Economic growth for 2021 is widely projected to be around 8 per cent thanks to the low comparison base, but many state researchers warned that small businesses will have a tough year ahead.
“Service sectors such as catering, travel and transport haven’t fully recovered [from the damage caused by the coronavirus outbreak]. It means huge pressure on employment,” Wang Yiming, deputy director general of the China Centre for International Economic Exchanges, said at a forum organised by Renmin University on Tuesday. “At the same time, many small and micro firms are still losing money due to insufficient demand and rising costs.”
This has dampened market expectations for consumption during the festive time, which has long been seen as a barometer for overall Chinese consumption during the year.
