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Many small and medium-sized businesses in China are suffering from the impact of the coronavirus. Photo: Xinhua

Coronavirus: small business sentiment sinks to all-time low as outbreak knocks China’s economy, survey shows

  • Confidence among small and medium-sized firms in China slipped to an all-time low in February, a new survey shows
  • Results offer fresh evidence that economic conditions on the ground are much bleaker than the official version painted by Beijing

Business sentiment among small and medium-sized firms in China plunged to an all-time low in February as the novel coronavirus struck a heavy blow to the world’s second largest economy, a private survey has shown, reflecting challenges facing Beijing if it wants to keep growth on track.

February’s business conditions index, compiled by the Cheung Kong Graduate School of Business (CKGSB) in Beijing, tumbled to 37.3 from 56.2 in January, as the effects of the virus rippled through China’s economy. The further a result below 50, the more pessimistic respondents are.

China’s government has repeatedly said the economic impact of the epidemic would be short-lived and the country would be able to meet its 2020 social and economic goals.

But the index, known as CKGSB BCI, offers fresh evidence that conditions on the ground are much bleaker than the official version painted by Beijing.

We were psychologically prepared for poor results to this month’s CKGSB BCI, but the actual figures are worse than we had imagined
Li Wei

“We were psychologically prepared for poor results to this month’s CKGSB BCI, but the actual figures are worse than we had imagined,” professor Li Wei, who led the survey, said in a statement on Wednesday. “To save the economy, there is an urgent need to improve China’s business climate.”

The survey spoke with 300 senior executives in CKGSB alumni firms and the results indicate that “Chinese industry as a whole will be experiencing tougher conditions than [the] sample”.

The corporate sales sub-index crashed from 72.1 to 32.8, while the corporate profit sub-index plummeted from 60.0 to 24.3.

“Both indices have tended to perform relatively well, and have maintained stability, but this month the sudden drop shows that our sample companies are in crisis,” the survey said.

Both indices have tended to perform relatively well, and have maintained stability, but this month the sudden drop shows that our sample companies are in crisis
CKGSB

About 45 per cent of companies surveyed have been unable to resume work, largely because of epidemic control measures and staff that have been unable to return to the workplace. Some 61 per cent of companies believed that their production capacity would not recover to more than 60 per cent by the end of February.

A separate monthly survey released this week by Standard Chartered Bank found that small firms were on average operating at 42 per cent capacity, while only 47 per cent of workers had returned on average. The spread of the virus had lowered China’s domestic demand to 46 per cent of normal levels, according to the survey

Small and medium-sized enterprises in the wholesale, retail and services sectors have felt the most pain and look for sales to recover gradually in April, the survey showed.

China’s National Bureau of Statistics is expected to publish the official purchasing managers’ index on Saturday, which will provide the first official glimpse of how the coronavirus – which has killed more than 2,700 people and infected nearly 80,000 people in China – has hurt its US$14 trillion economy.

President Xi Jinping has urged the country to prioritise resuming production, except in high-risk areas like Hubei province, the epicentre of the outbreak.

The Chinese government has begun rolling out economic aid for affected industries. The State Council gave banks another 500 billion yuan (US$71.1 billion) for targeted lending to small businesses, on top of the 300 billion yuan in additional funds released by the government in early February for epidemic relief. It has also introduced rent exemptions, tax cuts and reductions in social security contribution.

Additional reporting Bloomberg

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This article appeared in the South China Morning Post print edition as: Business mood among SMEs hits record low in February, survey finds
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