Data points to SMEs' stronger biz confidence

China's Small and Medium Enterprises Development Index grew by 1.3 points in the first quarter of the year, compared with the previous quarter, marking the highest increase of the index since the fourth quarter of 2020, industry data showed on Sunday.

The index, which is calculated based on a survey of 3,000 small and medium-sized enterprises, posted 89.3 points between January and March, according to the China Association of Small and Medium Enterprises.

The objective of the index is to provide comprehensive evaluation and dynamic observation of the status and development of China's SMEs. It contains multiple subindexes to gauge their performances and growth expectations.

Among the eight sub-industry indexes, the hospitality and catering, transportation, information transmission and software industries experienced the highest increases in the first quarter of this year.

In the meantime, the macroeconomic sentiment index, which reflects the SMEs' confidence in future development, and the benefit index showed notable growth, according to the China Association of Small and Medium Enterprises.

Analysts said the government's continuous efforts to stabilize the economy, including tax cuts, fee reductions, consumption stimulation packages, measures to support the private sector and the resurgence of the exhibition economy, have contributed to the increase in business confidence among SMEs. They predicted that the growth trend will continue in the second quarter of the year.

Zhang Yongjun, deputy chief economist at the Beijing-based China Center for International Economic Exchanges, said the growth of the SME Development Index is mainly attributed to the government's efforts to increase lending for capital expenditure and support private investment in major projects since the second half of 2022.

"These (efforts) have not only created new development opportunities for SMEs in the industrial chain, but also boosted their confidence in the next stage," Zhang said, adding that many companies showed their willingness to increase investment in order to expand their production capacity in the second quarter.

China recently implemented measures such as extending tax breaks for low-profit small businesses and self-employed individuals, and providing pretax deductions for research and development expenses of companies.

These policies are part of the country's countercyclical economic policy adjustments and aim to promote innovation and industrial upgrade, according to Chen Bin, deputy director of the expert committee at the China Machinery Industry Federation in Beijing.

"The consistent implementation of these policies will effectively stimulate the market's vitality, spur exports and create fresh employment prospects this year," Chen said.

Since China optimized its COVID-19 response measures, many SMEs have been striving to expand their global market share in various industries such as automobiles, consumer goods, green development and high-end manufacturing, he added.

Textile and garment manufacturers from Shaoxing, Zhejiang province, have been heading in that direction. The city's exhibitor group, formed by 167 companies with a total of 224 booths and an exhibition area of over 4,000 square meters, gained intended orders worth over $35 million on the first day of the Vietnam Saigon Textile & Garment Industry Expo, which was held from Wednesday through Saturday in Ho Chi Minh City.

"Driven by mega free trade deals, such as the Regional Comprehensive Economic Partnership, and the growing trade value between China and the Association of Southeast Asian Nations, we are keen to further develop the markets in Southeast Asia," said Wang Yongwei, president of Xinchang Jinxing Machinery Co, a Shaoxing-based textile equipment manufacturer.

Covering a large number of SMEs, China's private companies saw their foreign trade value grow 5.3 percent year-on-year to 3.16 trillion yuan ($460 billion) in the first two months of 2023, accounting for 51.2 percent of the country's total export and import value, data from the General Administration of Customs showed.