Small businesses look to new growth paths
Online shopping changes picture for consumers
Liu Wenbin, 41, from Wuwei county, Anhui province, has spent 13 years in Beijing running a small shop selling roasted seeds and nuts.
Liu and his wife open their shop at 8 am and close it at 10 pm each day. Over the years, the business, which is close to the University of International Business and Economics, has attracted a growing number of customers.
“Overall, our business has improved during this time, thanks to customers’ trust and the quality products we sell, which are reasonably priced,” Liu said.
The annual rent for the 25-square-meter shop, which has risen by about 5 percent every year recently, is 150,000 yuan ($22,300).
“The increased rent eats into our profits, but so far we have been able to pay it, and our net income ranges from 200,000 to 300,000 yuan annually,” Liu said.
The couple has used Alipay and WeChat Pay at their business for more than three years and have found both forms of payment extremely useful. About 70 percent of their customers use these methods to pay.
“This means we don’t have to give change. More important, we don’t have to take lots of cash home, and the chances of us being given counterfeit banknotes are significantly reduced,” Liu said.
The shop, which is just one example of the millions of small businesses in China, reflects the changes that are taking place in the overall economy, for which a growth target of between 6 and 6.5 percent has been set for this year.
During the winter, 30 college students from several of the country’s renowned universities conducted a survey on hundreds of small businesses, covering nearly 20 cities and towns in 10 provinces.
Most of the business owners in the survey said it is not easy to operate. The emergence of shopping malls, ever-rising rent and labor costs all weigh heavily on them.
However, they said the overall situation is not too bad, with mobile payment, delivery platforms and online microfinancing channels providing them with new growth engines. Some 71 percent of interviewees were “quite optimistic” about the prospects for this year, while more than 30 percent plan to expand their businesses in 2019.
The central government attaches great importance to small and private businesses, as they are major contributors to employment.
In the Government Work Report delivered at the just-concluded two sessions, Premier Li Keqiang stressed that stimulating market players is key to maintaining steady development of the economy. A goal was set for large State-owned commercial banks to increase their loans to small and micro-sized enterprises by more than 30 percent year-on-year in 2019.
Minister of Human Resources and Social Security Zhang Jinan said during the two sessions that China has made great progress in stabilizing employment, but still faces critical challenges. Although the registered urban unemployment rate fell to 3.8 percent by the end of last year, the country faces continued employment pressure on a working-age population of 900 million.
At the end of last year, there were 73.3 million self-employed businesspeople in China, accounting for 66.5 percent of all market entities, according to the State Administration of Market Regulation. Moreover, the emergence of innovative small and micro-sized businesses has provided a new growth engine to fuel a reshuffling of the overall economic structure to make it more consumptiondriven and balanced among primary, secondary and tertiary industries.
Cheng Shi, chief economist at ICBC International, said in a research note that the vitality of microeconomies was emphasized in the Government Work Report. The central government’s efforts to offer better access to capital markets, and tax cuts on a large scale, are all expected to break a financing bottleneck for small and medium-sized enterprises, boosting their vitality.
To some extent, these small businesses serve as a barometer of the overall economy, enabling observers to spot ongoing changes and trends.
A number of small-business owners have felt growing pressure from the rapidly developing e-commerce sector as well as increasing rent and labor costs.
Wang Geng, 46, has run a stationery shop on Beijing’s North Fourth Ring Road for 10 years. In recent years, he has felt the impact of customers’ increased reliance on e-commerce.
“The daily turnover at my shop (1,500 yuan) is down by nearly half compared with five years ago due to rising costs and competition from the online shops,” Wang said, adding that about two-thirds of his income now comes from an investment he made in the parent company a few years ago.
He no longer hires assistants after business slumped. He used to have two staff members, each earning a basic monthly salary of about 3,800 yuan. He said he will pay 80,000 yuan this year in rent, which has risen annually in recent years by 8 to 10 percent.
But business owner Tian Xueying, who is in her 30s, said she does not feel undue pressure from online shopping.
“I’ve run a clothes shop in Beijing for almost 20 years, and my customers are very loyal. Some of them even started to visit my shop when they were in their 20s,” said Tian, who comes from Sichuan province.
Tong Xiaoling, 46, has managed a restaurant, which mainly serves noodle and rice dishes, with her husband in Chongqing for 12 years. Daily turnover at the 70-square-meter business, which is close to an industrial zone, is about 2,000 yuan, and the annual rent last year was 25,000 yuan, slightly higher than in 2017.
“We usually open at 7 am and close at about 9 pm. Except for the Spring Festival holiday, we open throughout the year, as business will be affected if we close for just a few days,” said Tong, who used to run a seafood wholesale business in other cities before arriving in Chongqing.
She said that since the start of last year, she has felt growing pressure, as customers are now more budget-conscious and competition has increased. The couple aims to update the menu, but has no plans to expand the business, in view of the huge amount of capital needed initially.
They also tried takeout platforms but had to abandon that, as the peak hours for online ordering coincided with those at the restaurant. They employ six assistants, who each earn about 2,000 yuan a month.
The couple has used Alipay and Wechat Pay since 2016, but has not applied for loans.
Financing difficulties have long been a headache for most small-business operators, but thanks to the rapid development of financial technology, or fintech, there has been some improvement on this front.
A number of small-business owners, especially young entrepreneurs, have seen the advantages of online payment.
Chen Rang, a young man in Nanjing, Jiangsu province, is one of them. Once he had familiarized himself with the financial products provided by internet companies, he found it much easier to deal with the cash flow and capital needed to expand his snack bars business.
Chen told Feng Mingming, one of the students from Nanjing University who carried out the survey, that the number of payments he obtained through mobile platforms dictated the level of financial services he was able to obtain from Alipay.
With a score of 761 on Alipay’s credit system — a relatively high total indicating strong finances and a solid ability to repay debts — Chen can obtain loans from Ant Financial, Alipay’s parent company, to increase his stock and pay rent. Running three Shaxian Snack bars, a chain with more than 60,000 outlets nationwide, he has a credit quota of 120,000 yuan to increase his inventory.
MYBank, the online lending affiliate of Ant Financial, said that by the end of last year, it had offered more than 2 trillion yuan in loans to over 13 million small and micro-sized enterprises. More than 6 million of these businesses used the credit to expand their operations.
Jin Xiaolong, vice-president of MYBank, said it aims to make its microfinancing services available for all self-employed people, including street vendors, in the next three years.
Luo Zhenyu, the founder of iGet, a mobile online learning application, said during his speech to mark the start of the Western New Year that mobile tools mean each payment in the catering industry can be traced.
This helps provide much first-hand data for credit collection, which is significant not only for the industry itself but related sectors. Thanks to mobile payment, a number of emerging catering companies have received cash injections from venture capital and private equity companies, and have later listed on the stock market.
Liu Shangxi, head of the Chinese Academy of Fiscal Sciences, said adopting financial technology is an effective way of alleviating financing difficulties for small and medium-sized businesses.
“We have a worldwide problem, where small and micro-sized enterprises are finding it hard to access affordable loans. Given their vulnerabilities and high financial risks, offering them credit is highly likely to reduce lenders’ returns,” Liu, also a member of the 13th National Committee of the Chinese People’s Political Consultative Conference, said during a panel discussion at the two sessions.
“To crack this hard nut, China has found a solution amid the rapid advances of fintech services, such as automatic approval for financing applications, and big data instruments that can assess enterprises’ operational performance. The problem lies in how to better apply these technologies to the financial system.”
Mobile payment has moved into the restaurant sector, enabling diners to both order meals and foot the bill. This also saves on labor, especially during peak hours.
Liu Hao, 35, who runs a sushi restaurant in Hangzhou, capital of Zhejiang province, with two assistants, said, “I don’t mind paying for these services, as they do me a big favor. ”
Moreover, food delivery services such as Meituan-Dianping and Ele.me have been able to save on rent as business thrives.
Instead of paying exorbitant rents in popular commercial areas, they can operate from quieter districts and attract customers through online platforms.
As an old Chinese saying goes, “As long as the food is delicious, fragrant wine fears no dark alley.”
The daily turnover at my shop (1,500 yuan) is down by nearly half compared with five years ago due to rising costs and competition from the online shops.” Wang Geng,
who has run a stationery shop on Beijing’s North Fourth Ring Road for 10 years