The Impact of Covid-19 on

SMEs in China
Evidence from Two-waves of Phone
Surveys

Xiaobo Zhang
IFPRI and Peking University

July 28, 2020

Two follow-up phone interviews on SMEs

 In early February, we launched a rapid follow-up interview with a

representative sample of private entrepreneurs from a database
(Enterprise Survey for Innovation and Entrepreneurship in China,
ESIEC) we gathered in 2017-2019: 2,335 SMEs.

 In mid-May, we conducted the second-wave phone survey and

successfully interviewed 2,452 SMEs.
Reopening rate in February and May: by
province
By May, most
businesses had
reopened.
Heavy damage to SMEs

 Based on the February survey, we computed the expected death

rate in our sample (cash flow < expected opening date): 16.5%

 After the May survey, we estimated the actual exit rate: 17.9%

 Given SMEs account for 80% of total employment, the exit of

SMEs in such a scale means a loss of 13%-14% of total
employment during February and May, which could have a huge
adverse effect on poverty and consumption.
Despite high reopening rates, most production
was running at partial capacity in May
60% of SMEs reported their
employment reached 76%-100% of pre-
shock level
复工≠ 复产
Reopening ≠ full recovery
Production at the normal level of 26%-
50%

Workers Production
Major challenges in February: Mostly on
the supply side
Manufacturing: Labor and raw material shortage

Agriculture
enterprises:
logistics block

6
Lack of demand emerged as the major
challenge in May

7
Entrepreneurs had become less anxious, less
fearful, and less worried, and more optimistic from
February to May
Overall, expectation on output and orders on
the next quarter in May was positive
However, the manufacturing sector expected a drop in orders and
employment

PMI
>0.5: Optimistic
<0.5: Pessimistic

Output Order Employment

Agri. Manufacturing Business service Residential
service
In summary

 Covid-19 struck a heavy blow on SMEs

 By May, most businesses resumed production, but not in

full capacity

 The major challenges have shifted from the supply side to

the
demand side

 Entrepreneurs have become more optimistic, while

the employment outlook was lukewarm