March 23, 2020
By: Caity Witucki
Contributing Editor, Main Street Monday
Main Street Monday – Chinese Small Businesses Slowly Recover from COVID-19
Small businesses are slowly reopening in China as the deadly outbreak of the novel coronavirus declines. Recent estimates from Wu Haishan, the Vice President of WeBank in China, suggests that Chinese businesses outside of the virus’ epicenter have resumed 80% of their original business activity. As more reports from China surface, small businesses in America can glean an idea of what economic recovery might look like in the United States.
Small Businesses account for 99.8% of registered companies in China and employ 79.4% of their workers. Therefore, Chinese small businesses were hit the hardest by the recent U.S. tariffs and the coronavirus pandemic. Industrial output plunged 13.5% in January and February, retail sales fell 20.5%, and fixed-asset investment dropped 24.5%.
To counter the effects of the virus, President Xi Jinping’s administration introduced a $143 billion (¥1 trillion) economic stimulus package that focused on improving Chinese infrastructure. “We expect infrastructure stimulus to be stepped up to support aggregate demand and tax and fee cuts to cushion the COVID-19 shock,” says Chinese economist, Michelle Lam “Especially now external demand will be dampened by the global pandemic.”
While state-owned companies and large industrial businesses have officially resumed work, only a little over half of the smaller, privately-run businesses had resumed operations as of last week. Small business restaurants and bars are particularly struggling due to a lack of customer demand and returned workers. Chinese economists expect similar results in the travel industry as more restrictions are lifted.
Economic recovery has slowly risen but is now stalling around 60% of what the Chinese economy saw last year. The United States might see a similarly slow recovery. Gregory Daco, chief U.S. economist at Oxford Economics, believes the U.S. will experience a recession and a 12% contraction in output due to the coronavirus before bouncing back toward the end of the year. Such an outcome could lead to about one million job losses. However, he remains optimistic. “The coronavirus pandemic will lead to profound, pervasive and persistent, but not permanent, reductions in activity,” says Daco.
One of the best ways to help U.S. small businesses recover is to continue supporting main street during the outbreak. Continue ordering takeout from local small business restaurants, and consider going to local small business markets and shops instead of bulk warehouse stores.