One year after COVID: the challenges and outlook of Chinese micro-and-small enterprises

ABSTRACT

Based on a large Online Survey of Micro-and-small Enterprises (OSOME) conducted in March 2021 on micro-and-small enterprises and self-employed businesses (MSEs) operating on the Alipay platform, this paper examines the operational status, challenges, responses, and confidence of MSEs after exposure to the COVID-19 pandemic for over a year in China. The operational status of micro-and-small enterprises has significantly improved despite cash flow constraints. Rising costs and weak demand were two key challenges. In response to the COVID-19 shock, a higher percentage of newly established businesses adopted online sales and electronic information systems than those established earlier. Tax reduction was the most inclusive type of policy support. The confidence indices on market demand, production, and revenues for the next quarter returned to positive territory, indicating an optimistic outlook. The employment index remained just below the normal level, suggesting subdued expectations of expanded employment in the near future.

Keywords:

• COVID
• Micro-and-small enterprises and self-employed business
• China
• recovery

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. A survey conducted in April 2020 shows that 60.9% of individual businesses on Facebook were affected (Alekseev et al. 2020). On Alignable, a network of owners of small businesses, nearly 43% of MSEs in the United States have temporarily shut down since March 2020, and nearly half of them have insufficient cash flow for one month (Bartik et al. 2020). The number of active MSEs in the United States fell by almost 22% in April 2020 (Fairlie 2020). By June 2020, the decision to resume work and production of MSEs still depended on the recovery of upstream suppliers and downstream customers in the industry chain (Balla-Elliott et al. 2020). By the middle of 2020, despite the adoption of measures such as loans, grants, and tax rebates, the recovery of small businesses in the United States was still limited and this situation was predicted to persist in the following months (Bloom et al. 2021).

2. MSEs: businesses served by Alipay that are classified by the Measures for the Classification of Small, Large and Micro Enterprises (2017) as small and micro enterprises and whose annual revenue does not exceed 10 million yuan. Active MSEs are those that have, in the past twelve months, transactions in at least three months, more than 90 transactions, and a total transaction turnover of more than 2,000 yuan.

3. https://www.isss.pku.edu.cn/sjsj/zgqycxcytcesiecxm/index.htm.

4. More information on the samples from the third and fourth quarters of 2020 in Online Survey of Micro-and-small Enterprises Quarterly Report (2020Q3) and Confidence Index (2020Q4) at https://www.cer.pku.edu.cn/ztdc/zgxwjyztc/239804.htm and Online Survey of Micro-and-small Enterprises Quarterly Report (2020Q4) and Confidence Index (2021Q1) at https://www.cer.pku.edu.cn/ztdc/zgxwjyztc/239914.htm.

5. In this study, northern provinces (including provinces, autonomous regions, and centrally-administered municipalities) are Beijing, Gansu, Hebei, Henan, Heilongjiang, Jilin, Liaoning, Inner Mongolia, Ningxia, Qinghai, Shandong, Shanxi, Shaanxi, Tianjin, and Xinjiang; southern provinces (including provinces, autonomous regions, and centrally-administered municipalities) are Anhui, Fujian, Guangdong, Guangxi, Guizhou, Hainan, Hubei, Hunan, Jiangsu, Jiangxi, Shanghai, Sichuan, Tibet, Yunnan, Zhejiang, and Chongqing. The five northern provinces that were recently hit by COVID-19 are Beijing, Hebei, Liaoning, Jilin, and Heilongjiang.

6. For the city category by Yicai, please refer to https://www.yicai.com/news/100648666.html. For example, the ‘first-tier’ city category includes Beijing, Shanghai, Guangzhou, and Shenzhen, and the ‘second-tier’ city category includes Chengdu, Dongguan, Foshan, Hangzhou, Hefei, Nanjing, Qingdao, Shenyang, Suzhou, Tianjin, Wuhan, Xi’an, Changsha, Zhengzhou, and Chongqing. Note that we define the ‘New First-tier’ by Yicai as ‘Second-tier’ in our data.

7. Northern provinces that were hit by COVID-19 are Hebei, Henan, Heilongjiang, Jilin, Liaoning and Xinjiang. Other northern provinces include Gansu, Inner Mongolia, Ningxia, Qinghai, Shandong, Shanxi and Shaanxi. Municipalities directly under the Central Government such as Beijing and Tianjin are not included in the analysis.

8. Southern provinces that were hit by COVID-19 are Hubei, Guangdong, Hunan and Zhejiang. Other southern provinces include Anhui, Fujian, Guangxi, Guizhou, Hainan, Jiangsu, Jiangxi, Sichuan, Tibet and Yunnan. Municipalities directly under the Central Government such as Shanghai and Chongqing, Hong Kong SAR and Macau SAR are not included in the analysis.

9. http://www.stats.gov.cn/tjsj/sjjd/202103/t20210315_1814856.html.

10. 53.4% = 30.6% / (1–42.8%); 59.6% = 32.1% / (1–46.1%).

Additional information

Funding

We are grateful for support from a special grant for studying the impact of COVID-19 from Peking University; China Natural Science Foundation ((#71874008 and #71950011), and from the Ministry of Education in China (#14JJD790027)). The research assistance of Juxing Gu in helping prepare the English version is greatly appreciated.