Efforts to Support MSMEs Will Help Boost China’s Economy
This uptick in China’s consumer confidence bodes well for the economic recovery in the country and has already had a positive impact on small businesses.
Guangzhou, the capital of China’s prosperous Guangdong province, recently implemented 38 policy measures aimed at boosting the private sector as the world emerges from the pandemic. While these policies are welcome news for small businesses in the area, they are also emblematic of China’s broader efforts to support small businesses and promote economic growth this year.
China’s efforts to support micro-, small- and medium-sized enterprises (MSMEs) are critical to economic growth. Private MSMEs are estimated to contribute 50% of taxes, 60% of GDP, 70% of technological innovation, and 80% of employment, and account for 90% of all companies in the country. It’s clear that MSMEs are a vital part of China’s economic ecosystem and supporting them is essential to promoting long-term growth and stability.
As someone who runs a boutique creative agency in Guangzhou, I have been closely following the implementation of these policy measures and have experienced their impact firsthand. In the wake of the pandemic, many small businesses were struggling to keep the doors open, but the city’s tax exemptions, support for MSMEs, and subsidies for newly opened international and domestic cargo routes have provided much-needed relief. As a result, we’ve been able to reinvest in our operations, which has helped us better serve our clients. What’s more, we’ve noticed a growing willingness among clients to invest in creative services, which is a clear sign that the business climate in Guangzhou and across China is improving.
The signs of China’s economic recovery are more than just anecdotal. The National Bureau of Statistics reports that the country’s manufacturing sector recorded a PMI of 50.1 in January, indicating a return to expansion territory, with the new orders index also rising by 7 percentage points to 50.9%. Behind these figures are millions of small firms across China beginning to see more business and benefiting from supportive policy measures.
China’s dedication to fostering a favorable business climate is evident in the policies implemented by Guangzhou and other cities. These policies signal the government’s commitment to supporting small businesses and promoting economic growth, as highlighted at the annual Central Economic Work Conference last December.
This dedication is beginning to pay off, with foreign business leaders expressing increased confidence in the Chinese economy and market in 2023 compared to the previous year. China’s economy is expected to grow by 5.2% in 2023, according to the International Monetary Fund. Investment banks like Morgan Stanley and Goldman Sachs have also raised their growth forecasts for China, with J.P. Morgan saying in a research note that, “We believe 5% will remain this year’s growth target, though, in practice, 5% is perhaps now being interpreted as a minimum.”
The U.K. trade commissioner for China, John Edwards, recently commented to the Global Times that British companies are feeling increasingly confident about the Chinese economy and market in 2023, with many companies expecting to expand their investment and trade cooperation in the country.
Despite the high level of business confidence in China, the country is not immune to global economic headwinds arising from a combination of factors, including a slowdown in worldwide economic growth, rising trade tensions and political uncertainty. This has put a strain on business confidence and has affected China’s economic prospects. Nevertheless, China has weathered the storm better than most countries, and foreign companies are continuing to invest in the country. In January 2023, China’s foreign direct investment rose by 14.5% year on year to 127.69 billion yuan, which is a testament to the resilience and attractiveness of China’s economy.
It is also encouraging to see the latest China consumer survey by UBS Group AG showing a notable increase in dining out, shopping in stores and offline entertainment. This uptick in consumer confidence bodes well for the economic recovery in the country and has already had a positive impact on small businesses. The more confident consumers feel about spending money, the more likely they are to invest in creative services like ours, which is crucial for the growth and expansion of our business.
As we look to the future, it’s clear that policies like those implemented by Guangzhou are crucial to the economic prospects of millions of small businesses across China. They not only signal the government’s commitment to supporting small businesses but also demonstrate a dedication to promoting economic growth and fostering a favorable business climate. These policies will continue to positively impact the global economy and the future of business in China.
Jay Ian Birbeck is a freelance columnist based in Guangzhou.