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Online Survey of Micro-and-small Enterprises (OSOME): Quarterly Report (2021Q3) and Confidence Index (2021Q4)

In September 2021, Professor Xiaobo Zhang from Guanghua School of Management, Peking University, with support from the Center for Enterprise Research, Peking University and the Institute of Social Science Survey Peking University, and in cooperation with Ant Group Research Institute and MY Bank, led a team to conduct the Online Survey of Micro-and-small Enterprises (OSOME) for 2021Q3 in China. The team sent out questionnaires to randomly selected active MSE owners over a two-week period with a collection of 14,567 valid responses. This survey contained information on the operation, financial needs and business confidence of the Chinese MSEs, covering various regions and industries. This report aims to provide a broad picture of the business conditions, challenges and confidence towards the next quarter of MSEs in China.

This survey is the fifth consecutive survey on MSEs in China by the research team. The team will continue to conduct the survey on a quarterly basis, to provide statistical support on the operation of MSEs for market participants, the academia, policy makers and the general public.

Main findings of the 2021Q3 OSOME:

1. In 2021Q3, business conditions of MSEs in China improved relative to the previous quarter, yet still pressed by rising costs and sluggish demand.

   On a quarterly basis, MSEs’ operating income and cash flow improved, whereas profit rate has declined. 2021Q3 showed greater recovery to the pre-COVID (2019) levels than the previous four quarters. However, rising costs, especially rental costs, and lack of demand are still the main challenges faced by MSEs.

2. MSEs have received some benefits of policy support. MSE owners expect more reforms on platforms and market regulations.

   Comparing to 2021Q2, MSEs continued to benefit from policy support, of which universal tax reliefs were relatively more effective. MSEs had strong financial needs, owner’s equity and retained profits were the main sources of finance. Online financing has become an important channel for MSEs’ access to finance. MSE owners welcomed the regulations on big platforms. They asked for market reforms on more straight-forward procedures for registration and exit.

3. MSEs of different ownership showed signs of divergence in their needs for finance. Corporations demanded less finance while individual owners’ need for finance remained stable with more support from financial institutions.

   Comparing to 2021Q2, owners of corporations accessed significantly less finance from family and friends as well as financial institutions. On the other hand, unregistered and registered individual owners received similar level of finance from family and friends, with a slight increase of funds from financial institutions. Sluggish aggregate finance growth in 2021Q3 was evidenced by the weaker finance for corporations in our data, while smaller MSEs showed greater resilience.

4. MSEs are generally less buoyant towards 2021Q4. The Confidence Index for corporations recorded a lower reading, whereas smaller MSEs’ confidence remained stable. The vast MSEs in China are the important stabilizer of the macroeconomy and the indispensable reservoir of employment.

   The Confidence Index (CI) for MSEs remained relatively stable comparing to 2021Q3. Indicators of market demand, output and operating income were expansionary, while MSE owners were less optimistic towards the future. Rising costs remained the main challenge faced by MSEs, despite being less concerned in 2021Q4. Furthermore, the employment index fell to being close to the 50-point threshold after reaching the expansionary territory for the first time in the previous quarter. The sub-index for unregistered individual owners was still below the 50-point threshold.