Local governments take measures to help SMEs as economy affected by virus outbreak
February 11, 2020 Category China News Round-up, Weekly
China’s local governments and e-commerce platforms are moving to reduce rents and offer financial support to help small businesses tide over the novel coronavirus outbreak. The city of Beijing has extended the collection period of social insurance premiums to the end of July for companies in tourism, catering and other hard-hit industries, allowing them to delay their payments during the coronavirus epidemic. Suzhou in Jiangsu province has asked banks to increase financial support to small and micro-enterprises. It also said SMEs that are leasing state-owned properties will have their rent waived for one month and halved for another two months. Meanwhile, Suzhou, Shanghai and Qingdao have proposed to return half of the unemployment insurance premiums paid in the previous year to employers that do not lay off workers. Experts warned that small businesses, a major force in the job market and livelihood-related services, are more susceptible to the virus’s economic repercussions.
Alibaba-backed internet bank MYbank said starting from February 2, the interest on loans will be cut for 1.5 million shops and 300,000 pharmaceutical shops in the epidemic epicenter of Hubei province. Small shopkeepers who contract the new coronavirus will enjoy interest exemption. Huazhu Group, one of China’s largest hotel operators, announced it would halve franchise fees for all affiliated hotels nationwide from February 1 to March 31. Those in the locked-down areas of Hubei will have franchise fees waived during the period, it said. Online food delivery and ticketing services platform Meituan Dianping also said all take-out businesses in Wuhan will have one month’s commission exempted. Zhou Qingsong, who operates a hotel with 40 employees in east China’s Zhejiang Province, said business volume has plummeted by 95% as many guests chose to stay at home to reduce infection risks during the Spring Festival, an otherwise peak travel time.
According to a survey from the CEIBS Business Review which polled 995 SMEs covering a wide range of industries including processing, logistics, retail and high-tech, only 9.96% of firms said they could survive six months with current cash liquidity. More than 34% said they could survive only one month. Moreover, 29.58% of firms predicted the epidemic could lead to a decline of more than 50% in their 2020 revenue, while 28.47% expected a revenue drop of 20% to 50%, according to the results of the survey.
The Caixin China General Services Purchasing Managers Index (PMI) fell 0.7 percentage points to 51.8 in January, its lowest since November 2019. Industry analysts say the fall in PMI is within expectations and the Chinese economy still has great resilience amid the coronavirus outbreak. Hong Tao, Director of the Institute of Business Economics at the Beijing Technology and Business University, told the Global Times on Wednesday that the PMI is now at its lowest level in four months, but it is normal and within expectations. The Caixin manufacturing PMI edged down 0.4 percentage points to 51.1 in January.
Liu Chunsheng, Associate Professor of International Trade at the Central University of Finance and Economics, said the outbreak will still suppress economic activity in the near future, but economic growth should see a recovery starting from the second quarter. “The virus outbreak is testing the Chinese economy, but it should not change the basic trend of steady economic expansion,” Liu said. “Policymakers need to make efforts to ensure there are no major disruptions to improving business confidence,” said Zhong Zhengsheng, Chairman and Chief Economist at CEBM Group, a Caixin subsidiary. Liu called for more favorable policies for new businesses springing up amid the outbreak, such as online education and robotics, the China Daily reports.
It is not exactly clear how much of the country’s 288 million migrant workers, which account for one-third of China’s total labor force, remain stuck in their towns and villages. But a labor shortage issue seems to be haunting major Chinese cities including Beijing, Shanghai, Guangzhou and Shenzhen. Analysts said that persistent labor shortages could also have an impact on infrastructure investments, which are deemed key driving forces for economic growth in big cities. “The lack of construction workers is of course a headache. But as government departments are also running short of hands, officials will prioritize tackling the virus over other projects, such as stabilizing fixed-asset investments,” Wang Jun, Deputy Director of the Department of Information at the China Center for International Economic Exchanges, told the Global Times.
China’s consumer prices rose at the highest rate in more than eight years. The consumer price index (CPI) rise was 5.4% last month year-on-year, up from 4.5% in December – with prices of pork and fresh vegetables pushing up the CPI. It is the highest rise since October 2011. Food prices spiked 20.6%, including pork, which rose 116% from a year ago.
The Guardian reports that the ratings agency S&P has slashed its forecast of China’s economic growth for this year by 0.75 percentage points, saying the coronavirus will deliver a big temporary hit to the country’s economy that will spill over to the whole world. S&P said it now forecast Chinese GDP growth of 5%, down from its previous estimate of 5.7%, but cautioned that it was less confident in its figures than usual because of continuing uncertainty over the severity of the outbreak. This will flow through to the global economy because China accounts for a third of worldwide growth, S&P said.
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