It has been two years since the COVID-19 outbreak. In the beginning, almost all countries announced lockdown and closed their borders. To some degree, it protected local residents from the disease, but most economic activities had to be postponed. This has had a detrimental impact on small businesses.
According to the International Monetary Fund, the overall GDP in 2021 was lower than in the pre-COVID-19 projections . Within a depressed economic situation, micro and small businesses face more challenges compared to larger companies as they are much more vulnerable. To survive and prosper in these challenging and unprecedented times, small businesses need more attention and assistance from governments as well as international organizations.
To respond to the crisis, Chinese government announced a series of policies to support small and medium enterprises. One of them was reducing taxes, with MSMEs exempting over RMB 2.5 trillion of taxes and government fees. It offered financial support, encouraging banks to increase loans to micro and small businesses at lower interest rates .
In this article, we examine the impact of the lockdown on small businesses based on the Lockdown Economy interviews by Think Tank AlterContacts, and discuss the actions that entrepreneurs have taken during the pandemic. We also look at the role the government should play and what they can do to effectively help Micro, small and medium-sized enterprises (MSMEs).
When governments announced the lockdown, shops with physical storefronts and the majority of trades had to stop their in-person operations. However, by embracing the internet and eCommerce, many of them could continue working. According to the Lockdown Economy interviews with Chinese entrepreneurs, small enterprises that were able to pivot quickly and transfer their businesses online, remained profitable. Others did not fare as well.
Xiang Shi, the CEO of Alchemy Pay, an international payment service, thinks that changing their business model and embracing an online strategy were the steps that allowed them to survive during the lockdown . Prior to COVID-19, they offered online and face-to-face service to consumers. Since the lockdown, they focused only on online services, started promoting their products via social media and developed an app.
Some small companies tried to run their business online and post ads on social media to attract consumers. But with the lack of experience and professional advice, they faced more risk than benefits navigating the digital world. For example, Charlie Huang, the owner of talent education school in Taiwan Province of China, says that despite successfully moving services online, he still needs professional help. He is looking for assistance with development of his long-term digital strategy, that would make his company more competitive .
The digital needs vary from company to company. Some face challenges in developing their online services, others need help with online marketing. In their interviews, Yueai Dong, the owner of a health business, and Felicity Chen, the owner of a food manufacturing company, explain that they need government to help them promote their services .
Technology plays a significant role in helping MSMEs through challenging times. It offers a platform for trading when physical shops are closed. However, with limited experience and training, MSMEs faced significant difficulties when trying to transfer their services online. Governments, as well as international organizations, could offer professional help for MSMEs to help them utilize technology during the pandemic.
Government should look to collaborate with international organizations to provide training, education, and workshops to support SMEs move services online. This could provide a good opportunity for entrepreneurs to share and discuss their issues and experiences. This networking could also provide them with a forum to explore new opportunities.
There is also an opportunity for the government to call on big consulting companies, incentivizing them to assist small businesses with free consulting and services.
It will be important for MSMEs to embrace technology to survive the pandemic. The government, as well as the international organizations, have an opportunity to provide assistance, not only from a financial perspective but also in training and advice. To meet the various needs of small businesses, the government needs to understand analyze pain points of MSMEs deeper as the pandemic progresses. Initiatives such as the Lockdown Economy by Think Tank AlterContacts where entrpereneurs share their challenges and ideas first-hand could be instrumental in the post-pandemic recovery.
Written by Mengxi Wu, who graduated with a master’s degree in international economics and finance
Edited by Kate Wellard
Editor-in-Chief - Julia Skupchenko
1 - International Monetary Found. (2020) World Economic outlook update June 2020: A crisis like no other, an uncertain recovery. Available at: https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020
2 -Statista. (2012-2020) Number of small to medium-sized enterprises in China from 2012 to 2020 (in millions). Available at: https://www.statista.com/statistics/783899/china-number-of-small-to-medium-size-enterprises
3 -Think Tank Alter Contacts, Lockdown Economy initiative, (February 3, 2021). Lockdown Economy China in international payments business with Xiangshi. Available at: https://www.youtube.com/watch?v=HymYDQhj5XA
4 - The fourth Session of the 13th National People’s Congress of the People’s Republic of China.(2021). Report On The Work Of the Government. Available at: http://www.xinhuanet.com/english/download/2021-3-12/report2021.pdf
5 -Think Tank Alter Contacts, Lockdown Economy initiative, (March 12, 2021). Lockdown Economy China in a talent education company. Available at: https://www.youtube.com/watch?v=YorXM2db1-Q
6 -Think Tank Alter Contacts, Lockdown Economy initiative, (February 5, 2021) Lockdown Economy China in a health Business with Yueai Dong. Available at: https://altercontacts.medium.com/lockdown-economy-china-in-a-health-business-with-yueai-dong-3c2a183aaad
7 -Think Tank Alter Contacts, Lockdown Economy initiative, (November 5, 2020) Lockdown Economy USA in a food Business with Felicity Chen. Available at: https://www.youtube.com/watch?v=Mn56P31KFXs
8 -Think Tank Alter Contacts, Lockdown Economy initiative, (January 12, 2021) Lockdown Economy USA in a Brand development Business with Eva chan. Available at: https://www.youtube.com/watch?v=445SBxkeaAE
9 -Think Tank Alter Contacts, Lockdown Economy initiative, (March 6, 2021) Lockdown Economy China in an UI Design Online Education Company with Elise Fu. Available at: https://www.youtube.com/watch?v=rLD2J31om_A