Credit Card Service:400-88-95580  |  Call Center:95580  |  简体中文   |   繁体中文

Users of iOS and Android can directly download mobile banking by scanning the QR code.


Small and Micro-sized Economy Fluctuated More Sharply in July and More Policy Support is Needed

Date: 2016-05-13

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

In July, the global economy still had no clear signs of recovery in sight and meanwhile took on obvious regional differentiation and intensified fluctuation, as mainly seen in the pressure imposed by the expected US manufacturing industry pickup and interest rate increase on the emerging economies and the financial market, the continuous turmoil in Eurozone and the more unpredictable economic recovery due to the rocky bulk commodities such as gold and oil. In this background, the Chinese economy also fluctuated somewhat, which can only be taken as one of possible forms of bottoming out so far. The macroeconomic operation trend could be seen notably in the growth of small and micro-sized economy. According to the “Economic Daily-PSBC Small and Micro Enterprise Operating Index” (hereinafter referred to as “SMEOI”) in July 2015,  the general index showed a downward trend after remaining unchanged in June on the one hand and started to display a regional differentiation on the other hand. Therefore, mall and micro-sized economy urgently needs the support of fiscal and monetary policies boost its operation.

In the past month, the global monetary market became a focus of attention. On the one hand, the expected US interest rate increase posed significant pressure on the emerging economies; on the other hand, the economic operation states of China,  Russia and other countries in a transitional period need to a continued loose monetary policy to get stabilized and pick up while the political unrest in Europe brings potential pressure to the monetary base in Eurozone. Against such backdrop, the Chinese economy, already faced with great pressure from balance of international payments, has to address the downward trend. The financial de-leveraging and investment de-capacity may slow down the financing growth rate, thus further causing a falling growth rate of fixed assets investment. The manufacturing industry remains sluggish, with the PPI (industrial producer price index) on the decrease and the total demand at a low level.

Seen from the central government’s attitude towards industrial structure, as the reform reaches with great depth, the importance of “adjusting structure” in the current stage becomes more prominent, which indicates that economic recovery has been deemed as a middle and long-term indicator. While pushing through the structural adjustment, China won’t easily give up on the historical opportunity of strategic transition due to the economic downturn. Therefore, stabilizing and gradual bottoming out of economic operation may become the new normal.

Shown by the data of June from the National Bureau of Statistics, the consumer price index (CPI) got gradually stabilized and the industrial producer price index (PPI) continued to decline, which shows that the pains from phasing out the backward production capacity in adjusting structure are inevitable but are not necessary to seriously impact the consumption.

Likewise, we can also see that the general index of small and micro-sized enterprises (SMEs) outperformed the trend of PPI, by presenting a slower decline. Taking this as a good sign, we hope small and micro-sized economy can stabilize and pick up ahead of macro economy.

Specifically, the general index of SMEOI reported 47.0 in July, down 0.2 point slightly over last month and still below the threshold separating contraction from expansion. Various sub-indices showed regional and industrial differentiation.

First of all, among the sub-indices, the market index, the purchasing index, the performance index and the risk index all dropped by 0.2 point, the expansion index and the financing index each fell by 0.1 point, the confidence index remained unchanged from previous month, and the cost index increased by 0.7 point. Ups and downs could be seen in the month. On the one hand, the rising cost index indeed could help enterprises to reduce production and operation cost; on the other hand, it also reflects the overall manufacturing industry and the production and management activities at raw material end remained relatively sluggish.

As for the regional index, some regions showed outstanding highlights. The SMEOI in North China posted 45.7, down by 1.2 points and that in South Central China registered 47.2, a decrease of 1.2 points. These two regions are still in the initial stage of de-capacity, and the conduction of economic fluctuation has been reflected somewhat. The index in Southwest China stood at 47.0, a decrease of 0.1 point and tending to flat; that in Northeast China was recorded at 48.2, up by 1.4 points; that in Northwest China reported 47.3, an increase of 0.8 point; and that in East China was 47.1, up by 0.2 point. In Northeast China, Northwest China and East China, all the three regions started to rebound but showed different conditions. The pickup in Northeast China stemmed from the policy support and the strengthened investment to infrastructure construction, the rise in Northwest China was related to its industrial features and climate features, and the rebound in East China was driven by the rise of emerging industries during de-capacity process.

In the light of industrial index, the SMEOI in the wholesale and retail industry reported 48.9, down by 0.1 point; that in the manufacturing industry was 45.5, down by 0.2 point; that in the construction industry stood at 46.4, down by 0.3 point; that in the agriculture, forestry, husbandry and fishery reached 46.3, up 0.1 point slightly; that in the accommodation & catering industry posted 48.1, up by 0.3 point; that in the service industry was recorded at 47.4, down by 0.4 point; and that in the transportation industry registered 47.3, up by 0.4 point. Despite the ups and downs, the conditions of industries were quite different. The manufacturing industry was still on the decrease, which imposed a pressure on the overall recovery of small and micro-sized economy. Fluctuations in the construction industry, the agriculture, forestry, husbandry and fishery and the accommodation & catering industry occurred regularly. But the rebound of the transportation industry was an importantly good signal, because the increase in industrial profit was accompanied with a pickup of industrial indexes. In some sense, if the mixed trends of rise and drop can narrow down to some extent, the recovery of small and micro-sized economy looks within reach.

The financing and risk problems confronting SMEs need special attention. According to the index report, some of the SMEOI indicators rose while others dropped and some industrial and regional highlights appeared. The financing index of SMEs in July reported 50.9, a slight decrease of 0.1 point, wherein the financing index of the agriculture, forestry, husbandry and fishery sustained the largest decline, down by 1.1 points. The risk index of SMEs over the same period posted 50.8 and continued to drop by 0.2 point, wherein the index of the service industry witnessed the greatest fall, down by 1.7 points. Seen from the inspection and survey findings, the working capital of SMEs tended to be tighter as compared with the previous period. But this tendency occurred with the loose monetary policies in place. Therefore, the subsequent operation of small and micro-sized economy is still not optimistic and needs more policy support so as to get stabilize and recover as soon as possible.