China's small and medium-sized enterprises have shown upward momentum in resuming work and business activity, although further policy efforts are needed so that more of them can resume operations at full capacity, according to a recent survey by the China Association of Small and Medium Enterprises.
Facing multiple challenges and difficulties, SMEs are under huge pressure to sustain profitability and growth, but their development climate is improving as the effects of pro-growth policy measures gradually unleash more potential, experts said, while calling for more policies to shore up SME growth.
China's Small and Medium Enterprises Development Index for July, based on the association's survey of 3,000 SMEs, showed around 43.7 percent of surveyed firms were operating at over 75 percent capacity, up 1.75 percentage points from a month earlier.
The proportion of enterprises operating beneath 75 percent capacity was 47.75 percent, dropping 2.6 percentage points from that of June.
However, the overall SME development index declined slightly from 88.4 in June to 88.3 in July.
Ma Bin, executive deputy president of the association, said Chinese SMEs currently face more pressure and difficulties as the impact of domestic resurgences of COVID-19 lingers and exacerbates shrinking demand, supply shocks, and weakening expectations, while uncertainties in global markets also grow due to factors such as the pandemic, geopolitical issues and increasing concerns over stagflation in the global economy.
"Pressure and difficulties facing small and micro-sized enterprises are especially obvious," Ma said, adding that major problems facing SMEs, especially small and micro-sized firms, include rising costs, meager profits, financing difficulties, and labor shortages.
She suggested more efforts be made to consolidate the upward momentum of the economic recovery.
Among the subindexes for eight sectors surveyed, transportation, postal, and wholesale/retail registered month-on-month increases, while construction, lodging, and dining stayed flat from June.
Indexes for industry, real estate, social services, information transmission, and computer software all dropped slightly.
Zhou Maohua, an analyst at China Everbright Bank, said the resumption of work and business among SMEs is still beneath pre-pandemic levels, despite remarkable recent progress.
But Zhou said SME operations will continue to improve as domestic demand rebounds on the back of the accelerating Chinese economic recovery.
"China is gaining better control over COVID-19 and disruptions from the contagion to business operations and people's lives are weakening," he said.
"That, together with more policy effects expected to be unleashed to ensure supplies, stabilize prices and help enterprises stabilize growth, will lead to more rebound in domestic demand to steadily improve SMEs' operations and profitability," Zhou added.
According to the SME association's survey results, subindexes for SME development in the construction industry, transportation, postal, and storage sectors have risen for three consecutive months.
The survey also found that among the eight industries surveyed, liquidity indexes for seven industries and financing indexes for five rose from that in June.
Chen Jia, a researcher at the International Monetary Institute of the Renmin University of China, said there will be ample opportunities to shore up the growth of SMEs in sectors such as digital infrastructure, new energy, digital economy, and modern services, as China stresses development in related industries.
Chen suggested China improve financing policies and services for SMEs, as well as guide more investment and talent into emerging and promising industries, instead of labor-intensive ones that already suffer from fierce competition, in order to optimize resource allocation.
He also suggested industry funds at both national and local levels pay more attention to SMEs in strategically important industries, such as the internet of things chips, new-generation artificial intelligence networks, and smart driving technologies.
