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China sees small improvements in key economic sectors

China sees small improvements in key economic sectors

China’s small and medium-sized forms performed marginally better in June compared with the previous month, on the back of better containment of the COVID-19 pandemic and a package of stimulus policy measures.

The latest data shows a small improvement over May’s figures, and experts say a gradual recovery in growth momentum reinforces the view that China’s economy will rebound steadily in the second half of the year.

China’s Small and Medium Enterprises Development Index, based on a survey of 3,000 SMEs, rose by 0.2 points from 88.2 in May to 88.4 in June, according to the China Association of Small and Medium Enterprises. The Index reported a fall for four consecutive months to May 2022.

Xie Ji, secretary-general of the China Association for Small & Medium Commercial Enterprises (CASME), said the improvement in June was due to the gradual resumption of production and stronger policy support.

“Our survey showed that 25.9% of enterprises fully resumed their business, and 42% were operating at over 75% capacity,” Xie said.

Zhou Maohua, an analyst at China Everbright Bank, said: “As growth stabilized in May, with improvement in key indicators like value-added industrial output, China’s economy will rebound steadily in the second half, and SMEs will continue to enjoy a favourable environment.”

However, he warned that many SMEs face “multiple pressures and difficulties like high costs and shortage of some parts”.

And more effort should be made to implement existing policies on stabilizing the growth and ensuring stable prices and supplies, while financial institutions should be encouraged to increase support for SMEs and deepen financial reforms, Zhou said.

CASME’s Index also gauges the performance and expectations of SMEs (sub-indexes), with a reading below 100 indicating a slowdown.

The sub-indexes for the eight sectors surveyed, including industry, construction, transportation and real estate, all registered a month-on-month increase in June. Accommodation and catering reported the largest rise in June, up by 0.6 point month-on-month to 81.3.

Chen Jia, a researcher at the International Monetary Institute of the Renmin University of China, said “the improved performance of SMEs showcased the long-term development resilience of SMEs and their capabilities to deal with pressures in the short term”.

Chen said: “If the (upward) trend remains unchanged in the next few months, China’s private business, dominated by SMEs, would witness substantial recovery.”

Looking ahead, Chen said he expected the country’s economic recovery to gather pace in the second half of 2022, with a significant improvement in some key economic indicators.

Another recent survey showed an improvement in both manufacturing and services. The official PMI for China’s manufacturing sector rose to 50.2 from 49.6 in May, and the country’s official services PMI came in at 54.3, compared with 47.1 in May, said the National Bureau of Statistics.

Another private-sector survey, which focuses on small and export-oriented businesses, also showed an improvement in economic activity in China in June.

Caixin’s composite PMI, which includes both manufacturing and services activity, rose sharply to 55.3 in June from 42.2 in May, according to media group Caixin.

 

Bank regulator wants speedier roll-out of finance

Meanwhile, China’s top banking and insurance regulator is urging the country’s finance sector to continue to increase the number of medium and long-term loans to the manufacturing sector.

Banking and insurance institutions should improve services to support the manufacturing sector, said a circular released by the China Banking and Insurance Regulatory Commission. It said that “banks should shore up financial support and innovate to develop products and services in key areas, such as advanced manufacturing, strategic emerging industries and the transformation and upgrading of traditional industries”.

It also said: “Banks should actively and steadily develop financial supply chain services to support upstream and downstream enterprises, while insurance companies should fine-tune risk protection services for manufacturers and sci-tech insurance services.

“Banks are also required to focus on weak links in the manufacturing industry and implement current financial support policies well by extending deferred loan payments for smaller businesses and companies hit hard by the pandemic.”