HONG KONG—Smaller businesses are proving to be a weak link in China’s economic recovery as they struggle to fully bounce back from the effects of Covid-19.
Like the U.S., China has tens of millions of small and medium-size private businesses, including restaurants and shops, which form the backbone of everyday economic activity. They account for as much as 80% of urban jobs and at least half of China’s tax revenue.
While businesses have benefited from China’s strong rebound this year, many are still trying to overcome weak consumer demand, rising operating costs and tight credit from banks that don’t want to sink more money into wounded companies.
Their struggles add a layer of uncertainty to China’s recovery. Many small businesses are reluctant to hire more workers, surveys show. Some say they are at risk of failing if conditions don’t improve substantially.
Close to 19% of China’s small businesses shut down last year, compared with 6.7% in 2019, according to a study released in March by Tsinghua University involving more than 50,000 companies nationwide.