China’s small businesses need ‘supportive policies’ to survive after closures tripled last year amid coronavirus

06-Mar-2021 Intellasia | South China Morning Post | 6:49 AM Print This Post

Small business closures in China jumped last year amid the unprecedented coronavirus outbreak, raising fresh calls for Beijing to expand rather than reduce its supportive policies for the sector that is vital for the nation’s employment.

A study led by Tsinghua University professor Liao Li found that the rate of small business closures in China last year almost tripled to 18.5 per cent compared to a year earlier, based on a sample of more than 50,000 companies nationwide.

The education, entertainment as well as agriculture and fisheries sectors were hit the hardest, with closure rates of 33 per cent, 31.7 per cent and 27.6 per cent, respectively.

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The transport, storage and industrial sectors were the least affected, with reported closure rates of 13.3 per cent, 15.4 per cent and 16 per cent, respectively.

The survival of small and medium-sized enterprises is important to employment and [workers'] livelihoods. Such research will help understand the impact of such emergent accidents, and provide reference to the making of supportive policies

Tsinghua University survey

“The survival of small and medium-sized enterprises is important to employment and [workers'] livelihoods. Such research will help understand the impact of such emergent accidents, and provide reference to the making of supportive policies,” the report said.

In Wuhan, where the original epicentre of the coronavirus outbreak that was placed under a 76-day lockdown, the closure rate was 24 per cent, an increase of 17.4 percentage points from a year earlier.

The research, published earlier this week in The Economic Observer, looked at business operations between February and July last year.

According to a separate report by the Chinese Academy of Social Sciences and business registration information platform Qichacha.com, more than 10 million businesses were dissolved or deregistered last year, an increase of 18.6 per cent from 2019.

Although the data does not necessarily mean the businesses closed or filed for bankruptcy, some 1.73 million firms were dissolved or deregistered in June alone, representing a year-on-year rise of 26.4 per cent.

New registrations rose 12.8 per cent year-on-year in 2020 to 27.4 million.

Small service businesses, which include street vendors, restaurants, travel agencies and offline touring services, are vital to the economy but are one of the parts that has been most vulnerable to external shocks like the coronavirus.

The government seldom publishes data on the closure of small businesses nationwide, but studies suggest they are under constant pressure, especially as the government is considering halting rent cuts, job subsidies and financing preferences, with Beijing concerned about increasing debt levels after it moved to bailout its coronavirus-hit economy last year.

China reported 2.3 per cent economic growth last year, led by investment and exports, and it is projected to rise by more than 8 per cent in 2021.

But the recovery from the coronavirus is uneven, with the industrial sector and larger firms less impacted than small service providers.

And China’s 90 million self-employed businesses, 286 million migrant workers and 9.1 million college graduates remain Beijing’s top concerns for employment and so social stability.

Tapering of fiscal and monetary policy is already on the government agenda ahead of China’s “two sessions” meeting, which starts this week in Beijing.

Companies in traditional sectors have been complaining about financial loss and worrying about their future

Tang Dajie

“Companies in traditional sectors have been complaining about financial loss and worrying about their future,” said Tang Dajie, secretary general of the China Enterprise Institute, a Beijing-based organisation which looks at the private economy.

“Many we surveyed are appealing for lower corporate burden, including their contribution to the social security fund.”

The All-China Federation of Industry and Commerce, a semi-official organisation which mostly represents large private firms, said it will submit suggestions to the upcoming parliamentary session of the National People’s Congress on how to relieve corporate financial difficulties.

The suggestions include strengthening antitrust checks for catering delivery platforms and forcing the reduction of commission fees, it said on Tuesday.

https://sg.news.yahoo.com/china-small-businesses-supportive-policies-100552950.html

 

Category: China

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