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Chinese SMEs In COVID

23 October 2020

On 15 June, Prof Yipeng Liu presented a detailed review of the impact of the COVID pandemic on Chinese SMEs and the entrepreneurial spirit. Speaking at an online event organised by the Interntional Council for Small Business (ICSB) and based on research from multiple sources, Prof Liu highlighted that the commercial impact of the pandemic had hit the smaller businesses harder than the larger ones, and while anxiety, fear and worry among entrepreneurs had risen, optimism was still present.

By 15 February 2020, even before COVID was declared a pandemic, the China Association of Small and Medium Enterprises released a report reviewing almost 6,500 SMEs across the whole of China. Only 1.5% of SMEs reported that COVID had had “no significant impact” on their business. The effect was huge, and it was fast and it was felt right across China. 86% of SMEs were classed as “greatly affected” (comprising 39% suffering “serious” impact with business temporarily suspended, 29% suffering “particularly severe” impact which will result in loss and 18% “barely operating”).

The single biggest cause of difficulties faced by SMEs was shrinking market demand and customer churn. 31% of them saw orders fall, 27% reported a loss of customers. We also learned that in that short time, overseas orders fell 70%. As a result, 68% of SMEs saw income fall, with 34% having only enough cash to continue operations for one month and 22% unable to meet their debt obligations.

However, by May 2020, 91% of SMEs had resumed work and China’s Small and Medium Enterprises Development Index, a measure of economic performance of SMEs, was up from 76 to 87 – good progress where the three-year high was 93.

Perhaps the biggest upshot is the way new technology has become even more embedded in SME business practices, and Chinese culture, as a result of the pandemic. 

Digital technology, the internet and data intelligence has helped research and testing, information services, epidemic prevention and control, supplies and donations. It greatly enhanced the efficiency of epidemic prevention and control and new online behaviours and services such as life services, online healthcare and work learning have become embedded as a result of the new digital economy ecosystem.

China took what Liu calls a “wartime response” to the pandemic which was seen as an “external shock” that broke locked-in thinking about old ways of doing things and was a major factor in further promoting the digital economy. COVID-19 led to changes in how consumers learned, it changed management practices in business and changed the decision-making process in the public sector. It gave a noticeable push to some industries to reach critical scale and get to profitable operations quickly and accelerate remote office working, online education and online medical care: all key elements of the new digital economy which have now taken firm root. All of this was helped by an accelerated commitment from Government down to SMEs to cloud computing, AI and big data infrastructure.

The full talk is available on Guanlidao’s YouTube channel and on the ICSB  YouTube channel

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