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Small and Micro-sized Economy Gets Stabilized

Date: 2016-04-26

Researcher Li Quan at Research Institute for Fiscal Sciences, the Ministry of Finance

At the end of 2015, the international economy continued the downturn and the Chinese economy witnessed declines in its growth rate and sharp fluctuations in its imports and exports, with all economic indicators going under considerable pressure. However, as a series of policies including the reform on supply front and an array of measures like expanding effective demand, absorbing over-capacity, and boosting exports were put in place by the Chinese government, the downturn in the macro economy has been slowed down to some extent and the signs of pickup emerged in some regions and emerging industries. The recovery was spotted first in the operation of small and micro-sized economic entities. At the end of the year, “Economic Daily-PSBC Small and Micro-sized Enterprise Operating Index” (hereinafter referred to as “SMEOI”) in December was on par with last month, signifying the downturn of small and micro-sized economy slowed down again.

The year of 2015 is an important milestone in China’s transformation and upgrading. Good at quick adjustment, small and micro-sized economy can adapt to the inevitable changes and reform in industries. A number of small and micro-sized enterprises (SMEs) have quickly spotted new business opportunities or directly entered into a hibernation period. Actually, small and micro-sized economy has started to lower its growth rate before the entire domestic economy.

Specifically, SMEOI in December registered 46.5, flat verse that in November. While small and micro-sized economy continued to dip but at a lowered pace, sub-indices of SMEOI together displayed “two ups, one flat and five downs”, regional indices represented “three ups and three downs”, industry indices reported “four ups and three downs”, indicated small and micro-sized economy operated under a slightly-eased yet worrisome pressure. By the end of the year, at the very heart of the stabilization of small and micro-sized economy is the manufacturing industry. So far SMEOI of the industry has dropped for three consecutive months, with the decrease enlarged from the beginning of the year. The index fell far below the purchasing managers’ index. It still takes more time for small and micro-sized economy to pick up. In addition, the big drop of the cost index, financing index and confidence index this month reflected that the stabilization of small and micro-sized economy is what the Chinese economy expects most in the current phase.

The year of 2016 marks the beginning of “the 13th Five Year Plan”. While continuing to implement the existing fiscal and monetary policies in favor of small and micro-sized economy, we will roll out more new preferential policies for small and micro-sized economic entities that meet requirements of industry policies. For instance, we may encourage various innovation funds to finance SMEs, lower the threshold for them to enter monopoly industries and raise funds, optimize the path through which they get included in the capital market, and improve their talent introduction mechanism. Only with multiple supporting measures, can small and micro-sized economy start to recover, stabilize and stride forward.