Mainland small Chinese businesses on an upward trajectory

The adoption of new technology and tapping into new markets helped small businesses on the Chinese mainland hit a five-year-high performance levels in 2024, according to a new survey by CPA Australia, one of the world’s largest accounting bodies.

Its recently released annual Asia-Pacific Small Business Survey found that 66% of small businesses on the Chinese mainland reported growth in 2024, while 71% expect to expand this year. Both results are at their highest level since 2019.

Innovation, improved business management and venturing into new markets have been crucial in shaping their positive business sentiment, as shown by the survey.

Meanwhile, the survey found that 74% of small businesses on the Chinese mainland anticipate local economic growth this year, exceeding the Asia-Pacific average of 67%, further boosting business confidence.

“The Chinese government’s supportive measures for private enterprises bolstered many small businesses to grow stronger and better last year,” said Lloyd Peng, CPA Australia’s North China Committee president. “Policies such as pre-tax super deduction for R&D expenditure and VAT exemptions for small-scale taxpayers have helped to foster a stable business environment and encourage businesses to continuously uplift their innovation capabilities.”

The survey also reveals that 88% of respondents from the mainland expect to introduce new products or services this year, 16 percentage points above the Asia-Pacific average. Additionally, 51% forecast that their overseas sales will grow this year.

“Innovation is a core competency among China’s small businesses. They are good at turning insights on customer needs and emerging trends into new products or services swiftly,” Peng said.

Their strong capability to provide value-for-money products or services will continue to win customers at home and abroad despite international trade uncertainties, Peng added.

CPA Australia collected 4,236 responses from small businesses in various industries across 11 markets in Asia-Pacific during November to December last year for this annual survey, including 757 respondents from Chinese mainland.

Education key to improving financial literacy of investors

Improving the financial literacy of ordinary Chinese investors will lead to more rational investment decisions and better long-term financial planning, according to investment experts.

Their comments follow a report that found Chinese people’s average score for financial literacy is 71.8 out of 100 at present, up from 68.7 a year earlier. They said progress can be attributed to a higher proportion of respondents with advanced education, efforts to address gaps in basic financial knowledge and increased awareness of financial risk and fraud.

The report, jointly compiled by Shanghai Jiao Tong University’s Shanghai Advanced Institute of Finance and global financial service provider Charles Schwab, has been published since 2022.

The latest results show a strong link between financial literacy and practical skills. In general, polled interviewees with financial investment experience score higher across all six gauges, including currency and banking, savings and investing, financial planning, safety and security, among others.

Improvements in financial literacy usually foster more rational and healthy investment practices, according to the report. For example, among the high-scoring respondents, 57% held positions for longer than one year, compared with only 45% among low-scoring respondents.

Respondents with higher financial literacy also build more diversified portfolios and are less likely to make speculative investments, according to the report.

Based on these findings, Wu Fei, a SAIF professor and the project leader, suggested tailor-made financial education for different groups.

“For the high-frequency and complex securities investments group, we can focus education on investment discipline, the risk-return trade-off, and risk awareness to help them avoid excessive speculative behaviour.”

Meanwhile, respondents with higher financial literacy demonstrate a better understanding of retirement planning as well as its necessity and different ways of saving for retirement.

However, long-term planning still needs encouraging in China. Only half of the interviewees said they have “a clear, specific and long-term financial plan”, slightly down from the ratio last year.

Even for adults aged between 26 and 45, who face complex financial needs and are at a critical juncture for retirement planning, only 55% of them have constructed a long-term financial plan.

According to Thomas Pixley, general manager of Charles Schwab (Shanghai), a long-term financial plan is especially important given the changing global economic landscape and the increasing market complexities. Such a plan can help individuals weather market fluctuations and avoid pain, he added.