China’s decelerating economy is weighing on the country’s small businesses, which account for 60% of its gross domestic product.
According to a survey by China’s State Administration for Industry and Commerce, 60% of small businesses, which are mostly family-run, said there is mounting pressure from competition. Also, 50% replied that they have sales difficulties.
There were 13,748,800 registered companies in China as of the end of March 2013. Of these, 10,966,700 companies are private, of which more than 80% are smaller enterprises.
In China, smaller companies are categorized by type as either micro, small or medium based on sales or employee numbers. For example, in the industrial field, a company with 1,000 or fewer employees or annual sales of 400 million yuan ($64.5 million) or less are categorized as smaller enterprise. Of these, those with 20 or fewer employees or annual sales of 3 million yuan are called micro enterprises.
China is at a turning point as it seeks stable growth following a period of rapid growth. Beijing held this year’s growth rate target unchanged from last year at around 7.5%. But a slowdown in economic growth is being aggravated by excess production capacity. Market competition is also growing.
China’s official manufacturing purchasing managers’ index for March, which primarily targets big companies, rose for the first time in four months. On the other hand, the PMI released by a private company that focuses on smaller companies fell below its boom-or-bust line of 50 for the third month in a row.
The government led by President Xi Jinping is promoting economic reforms. But close attention should be paid to smaller companies because they are a large source of employment.
