China’s small businesses forced to cut back on staff just to survive as economic mood sours amid trade war
- President Xi Jinping warned in January about a need to pay particular attention to the risks to social stability during the current economic slowdown
- China’s mood had changed very quickly from a rapid expansion of consumer spending last year to a cautious ‘consumption downgrade’
With the Chinese economy slowing, concern has increased among Chinese policymakers about the outlook for employment, since ensuring a sufficient number of new jobs is seen as a necessary ingredient in maintaining social stability in the country. Employment was the top priority the Politburo set last July when it shifted its economic policy focus to stabilising growth, leading the government to enact a series of policies to counter rising joblessness. This series will explore the employment challenges faced by different segments of the Chinese economy. The first instalment examines the issues confronting small to medium-sized enterprises.
Chinese President Xi Jinping warned on January 21 that the Communist Party needed to pay particular attention to the risks to social stability from rising economic problems, as evidence increasingly suggests that the nation’s employment situation is deteriorating rapidly, particularly among small and medium-sized businesses.
Whether Beijing will take the steps needed to end the trade war with the United States and stabilise growth this year remains to be seen, but Xi’s warning is borne out by the experience of business owner Guo Fengcen in southern Guangdong province, one of China’s export manufacturing hubs.
When deciding whether to borrow money to expand his business two years ago, Guo, who runs a group of small cake shops in the city of Dongguan, had not expected that the ups and downs of China’s economy would change so fast that they could upend his dream.
In February 2017, Guo and his family began their ambitious venture to expand a few small shops into a chain throughout the city, at the time when there was a common belief throughout the nation that every sector would continue to boom.
The outlook for all aspects of the economy, including consumer purchasing power, private investment, personal income, property prices, and the country’s technological advances, was bright.