China’s key small manufacturing, service businesses under pressure from rising costs despite overall economic recovery
- Small businesses in China that employ some 200 million people were offered tax exemptions, inclusive loan coverage and rent cuts to help insulate them from the impact of the coronavirus
- But results of a survey by Peking University and the Ant Group Research Institute show that rising raw material, utility, labour and rent costs are placing new pressures on the key sector
China’s small businesses, a key priority for Beijing in the post-coronavirus recovery given they employ some 200 million people, are feeling the pain of rising raw material, utility, labour and rent costs, according to a new survey.
Of small service providers surveyed, 56.2 per cent said rent was the main concern in the results of the survey which was released on Tuesday having analysed responses from 10,923 businesses who employed an average of 5.9 workers.
“Cost escalation and weak demand remain the two key challenges facing micro and small enterprises and self-employed businesses,” said the report, which was led by Peking University professor Zhang Xiaobo.
“The operational status of micro and small enterprises has significantly improved, but they still face serious cash flow constraints.”
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The quarterly survey was launched last year to measure the impact of the coronavirus, and the latest results showed that small businesses held cash that could support their operations for 2.6 months on average in the first quarter, slightly lower than the 2.7 months in the fourth quarter of last year and 2.9 months a quarter earlier.
First quarter revenues of surveyed businesses had recovered to 43.8 per cent of their 2019 levels, higher than 34.8 per cent recorded in the previous quarter, while profit margins improved to an average of 2.3 per cent from 1.5 per cent.
Looking forward, respondents expressed more optimism for orders and revenue in the second quarter with the confidence index for market demand rising to 55.5 from 47 a quarter earlier, while the outlook for revenues climbed to 54.8 from 46.4.
The employment confidence index, which remained in contractionary territory at 49.8, suggested subdued willingness to expand jobs in the next quarter.
A reading above 50 indicates expansion, while a reading below represents contraction. The higher the reading above 50, the faster the pace of expansion within the particular sector or area.