Yu Ruwen | Future Publishing | Getty Images BEIJING – As China seeks to shake off Omicron, the country’s rapid quarantine policy of zeroing Covid raises small businesses for a third year of uncertainty, stop and start. It’s a critical moment for this part of China’s economy. Small and medium-sized enterprises in the country have an average lifespan of three years, the People’s Bank of China said in 2018, before the pandemic. Although state-owned companies play an important role in China’s economy, they are the smallest non-state-owned enterprises that account for the majority of national growth and jobs. As Covid’s situation worsened this year, central and local governments issued a number of support measures — such as rent exemptions and tax refunds for some affected small businesses, especially in the service sector. Shanghai, which is in a two-way lockdown this week, announced about 140 billion yuan ($ 21.88 billion) in tax breaks, according to state media. But many small businesses “have no income, so tax and fee cuts no longer work,” said one financial analyst, who spoke on condition of anonymity in order to speak freely about the impact of Covid policy on growth, a sensitive issue at the moment. . China. This according to a CNBC translation into Chinese. Businesses are looking forward to government policies for a clearer understanding of whether it is worth keeping it for another year, the analyst said. At the moment “small businesses do not have enough confidence. They can not see how the pandemic will go.” China’s Ministry of Commerce was not immediately available for comment in view of the weekly press conference on Thursday afternoon. The Ministry of Industry and Information Technology did not immediately respond to a request for comment. Mainland China is trying to control Covid’s worst outbreak since the initial pandemic shock in early 2020 pushed the economy into contraction. The country returned to growth within a few weeks using lockdown to control the spread of the virus inside. China has insisted on a zero Covid policy for the past two years, while other countries have turned to a more relaxed “live with Covid” policy in recent months. The mainland has reported far fewer Covid cases or deaths than other major countries. And even with the last few weeks with scattered lockdowns and travel restrictions in large financial areas, other parts of the country are less affected. Anecdotes, the streets of Beijing are still full of fairly normal traffic. China’s National Bureau of Statistics said earlier this month that Covid’s impact will be felt more locally than nationally. The China Centers for Disease Control and Prevention warned in November that a coexistence strategy was likely to lead to hundreds of thousands of new daily cases and destroy the national medical system. If Covid’s situation remains serious, policymakers will allow more flexibility in how close GDP is to its target of around 5.5%, said Zong Liang, chief researcher at the Bank of China, noting that it is also possible growth over 5.1%. Government policy cannot help all businesses, Zong said, noting that those who can survive these three years are likely to have a stronger ability to withstand risks.
Small vs. large companies
Small businesses have struggled disproportionately as China’s overall economy has grown over the past two years. The official Small Business Market Index, an indicator of market conditions, persistently reflects a worse climate than large companies. It has remained in a shrinking area below 50 since May 2021. The PMI for small businesses rose to 46.6 in March from 45.1 in February, while for medium-sized enterprises it fell below 50 for the first time since October, according to official data released on Thursday. PMI for large companies held above 50 with a printout of 51.3. The high transmissibility of the micron variant behind the latest wave of outbreaks in China has made it difficult to monitor and control epidemics, local governments said. In severely affected areas, such as the northern province of Jilin and the southern metropolis of Shanghai, the new number of daily cases from the National Health Commission has remained high in recent weeks. An increasing number of reported new cases are asymptomatic and outnumber the symptomatic cases. More than 6,600 such cases were reported on Wednesday in the mainland, mostly in Shanghai. That’s well over 355 newly confirmed cases with symptoms per day.
Business disruption
To control the Covid cases, local authorities have announced lockdowns of city areas or individual buildings with just hours’ notice, which could disrupt business pockets. While large companies operating factories have sometimes stated that they could maintain production by keeping workers on site, companies that depend on shop windows or personal interaction face greater uncertainty. Anecdotes, a walk down a street in Beijing – near buildings that closed last week due to contact with Covid – found that about 15 windows on the north side were closed and those on the south side were open.
Read more about China on CNBC Pro
Also last week, police had to intervene in a scuffle in which traders demanded Covid-related rental waivers at a large wholesale clothing market in Hangzhou, near Shanghai, according to China’s State Internet Information Center. The report said market managers said they had not yet heard of local rental waivers and argued that the “pandemic must end” before such waivers could even be considered. CNBC was unable to obtain an independent response from market participants or traders. Earlier in the month, the Hangzhou government said it had closed the market to control Covid, but the health risk had expired by March 18. A state media report by China Internet Information said last week’s incident reflected the lack of local implementation of a central government document released on February 18. In the policy paper, China’s top financial planner and 13 other government ministries announced support for service businesses, including calls for resignations or rent cuts if the owner was a state-owned enterprise in a designated Covid medium- or high-risk area. The document also called on local authorities not to arbitrarily expand Covid’s high-risk areas or to arbitrarily restrict free movement.
