Two-Thirds of Chinese SMEs 'Stalled'... Growth Rate May Fall to 5.3%

[Image source=Reuters Yonhap News]

[Asia Economy Beijing=Special Correspondent Sunmi Park] Due to the spread of COVID-19 in China, two-thirds of small and medium-sized enterprises (SMEs) have still not resumed operations, indicating that it will take more time for economic activities to return to normal.

According to the Hong Kong South China Morning Post (SCMP) on the 26th, the Chinese government currently estimates that only about 30% of SMEs in China have resumed operations. At a press conference held the previous day, the Ministry of Industry and Information Technology of China pointed out that "the smaller the enterprise, the lower the rate of resumption of operations," adding that "only about 30% have restarted work."

This is because the spread of COVID-19 has made it difficult for migrant workers to return to the workplace, and the logistics system is not functioning smoothly, causing supply chain disruptions. Although Chinese President Xi Jinping has instructed efforts not only to prevent the spread of COVID-19 and treat patients but also to normalize economic activities, Chinese SMEs agree that returning to work is not easy.

Suan Wang, a manager of a textile export company in Zhejiang Province, said, "Although local governments issued guidelines to start production from the beginning of this month, it is difficult to operate normally before at least mid-next month," explaining, "Most of the suppliers our company deals with have restored less than one-third of their production capacity. All factories are experiencing worker shortages." Wang added, "Currently, a large workforce is trapped in Hubei Province, Sichuan Province, Guizhou Province, and Henan Province."

Zhou Ping, who operates a shoe factory in Dongguan, Guangdong Province, where manufacturing plants are concentrated, said, "Many companies of similar size to ours have mostly stopped factory operations," adding, "Many factories in Dongguan are experiencing worker shortages." According to Guangdong provincial government data as of the 23rd, about 1.7 million workers from Guangdong are stranded in Hubei Province, the epicenter of the COVID-19 outbreak, and approximately 10 million are staying in other regions including Sichuan and Henan Provinces.

As Chinese factories have been unable to operate on time due to the spread of COVID-19, some predict that in the worst case, China's economic growth rate could fall to around 5.3% this year.

Li Daokui, a former monetary policy committee member of the People's Bank of China and a professor at Tsinghua University, forecasted that China's economic growth rate this year will be between 5.3% and 5.9%, noting that this year's economic growth rate will largely depend on the speed of COVID-19 control and the prompt normalization of business operations.

Tsinghua University had previously predicted China's economic growth rate for this year at 6.1% before the COVID-19 outbreak. He emphasized, "The most crucial factor is to safely and smoothly normalize business operations," adding, "This is more important than any fiscal or monetary stimulus policy."

This content was produced with the assistance of AI translation services.