China’s small businesses need ‘supportive policies’ to survive after closures tripled last year amid coronavirus
- A study found that the rate of small business closures in China last year almost tripled to 18.5 per cent compared to a year earlier
- Education, entertainment as well as agriculture and fisheries were sectors hit the hardest, while transport, storage and industrial sectors were the least affected
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.
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.
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
“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.
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.
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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
“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.
