The Covid-19 epidemic has caused China’s economic slowdown. Not only are large enterprises suffering, but micro and small enterprises (MSEs) are also getting hit even harder. According to a recent survey, around 40% of MSEs have insufficient cash to support operations for a month. In other words, they will risk bankruptcy if the epidemic continues.

Peking University, Ant Group Research Institute, and MYBank conducted the survey in March.

The title of the report is “Online Survey of Micro-and-small Enterprises: Quarterly Report (2022Q1) and Confidence Index (2022Q2).

The findings show that in the first quarter of 2022, MSEs encountered a slowdown in operating income, cash flow maintenance, and profit margin. This is called the “three-drop dilemma.”

About 40% of respondents said that their cash flow was not enough to support them for one month. This indicates if the epidemic continues for another month, these businesses will face the risk of closing down. This could lead to a wave of unemployment.

Although Chinese authorities successively introduced a number of policies to support businesses to stabilize the economy and ensure employment, two-thirds of MSEs are still unable to benefit from these policies.

This is mainly because about 83% of MSEs don’t pay social security, 60% don’t need to pay taxes, and 37% have no funding needs.

Therefore, policies such as social security payment delays, tax cuts, fee reductions, and inclusive financial support cannot help these enterprises.

Under such circumstances, MSEs bear a more pessimistic outlook on the future.

According to the report, the total business confidence index for the second quarter fell below the prosperity line.

In terms of market demand, although the micro and small business confidence index is in the slightly optimistic range, the confidence in 3 areas, including business revenue, employee size, and operating costs, are all within the pessimistic range.

Overall, among all MSEs, the confidence index of corporate enterprises is better than that of individual households.

Researchers distributed the survey questionnaires randomly through the Alipay online research platform for two weeks. They recorded over 16,500 valid answers. The collected information involves the operation, financing needs, and future expectations of MSEs.

Its result was then released in April.

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