The current situation of private enterprises in Wuhan after unsealing: Policy rescue needs to be fast, accurate and ruthless

category:Finance
 The current situation of private enterprises in Wuhan after unsealing: Policy rescue needs to be fast, accurate and ruthless


A large number of private enterprises and individual economy go out of business - industrial chain breaks - industrial chain moves out - cities lose long-term momentum of economic growth

A large number of private enterprises and individual economic failures - deterioration of economic ecology - decline of private investment and withdrawal of capital

A large number of private enterprises and individual economic failures - population outflow - decline in human capital and innovation - decline in the price of capital goods such as real estate - deterioration of corporate balance sheet - financial risk

The central government first proposed six guarantees on April 17, and four guarantees in six guarantees are all related to keeping enterprises. Due to the advantages of state-owned economy and large-scale enterprises, in fact, the most important thing to keep enterprises is to keep private economy and small and medium-sized enterprises. So, what is the current situation of Wuhans private economy after the unsealing? From April 25 to 30, 2020, China new private economy research center of Wuhan University and Wuhan Federation of industry and Commerce carried out a survey on financial support policies for enterprises returning to work, which collected 413 enterprise questionnaires. Meanwhile, the research team also obtained 334 Wuhan enterprise questionnaires collected by the all China Federation of industry and Commerce on May 25, 2020. On the basis of these two questionnaires, the research group will analyze the operation status of Wuhan private economy.

1u3001 The distribution of the sample of research enterprises

The research team collected 413 valid questionnaires, including 9 state-owned enterprises (2.18%), 400 private enterprises (96.85%), and 4 Foreign-funded Enterprises (0.97%). The distribution of enterprise scale is shown in Figure 1, and the industry distribution of enterprises is shown in Table 1. It can be said that the data collection of the questionnaire survey is representative, and also in line with the development of Wuhan.

Figure 1: scale distribution of sample enterprises

Table 1: industry distribution of sample enterprises

All 334 questionnaires collected by the all China Federation of industry and Commerce come from private enterprises, including 13 large enterprises, 53 small and medium enterprises, 165 small enterprises and 103 micro enterprises. Among these enterprises, 14 are in the primary industry, 121 are in the secondary industry, 151 are in the tertiary industry and 48 are diversified.

1. Insufficient capacity recovery

Figure 2: enterprise capacity recovery

Compared with the results of the research conducted by the research group in Wuhan at the end of April, the re production rate of the National Federation of industry and commerce at the end of May increased slightly (see Figure 3). The enterprises with the re production rate of more than 80% increased to 21.56%, but the enterprises with the re production rate of less than 20% still accounted for about one third (31.74%).

Figure 3: capacity recovery of enterprises (investigation by all China Federation of industry and Commerce)

2. Serious decline of enterprise orders

The all China Federation of industry and commerce also investigated the order situation of enterprises. Figure 5 shows that compared with the same period in 2019, only 14 (4.19%) enterprises saw an increase in order, the same 51 (15.27%) enterprises, while 231 (69.16%) enterprises saw a decline in order, 123 (36.83%) enterprises saw a decline of more than 30%, and 38 enterprises did not choose (37 of them did not start work).

Figure 5: enterprise orders compared with the same period (data of all China Federation of industry and Commerce)

3. The enterprise revenue is expected to decline sharply in 2020

32.2% of the enterprises are expected to see a 32.2% drop in revenue in 2020, 34.38% of the enterprises are expected to see a 50% drop in revenue, and only 19.61% of the enterprises are expected to see a 30% drop in revenue (see Figure 6). Among the 413 enterprises, 71 are involved in export business, 46.48% are expected to decline by more than 50% in the whole year, 9.86% are expected to decline by 30% - 50%, and only 22.54% are expected to decline by less than 10%.

Figure 6: proportion of expected revenue decline in 2019

The expectation of enterprises for the future is also not optimistic. 25.67% of enterprises think it will take more than one year to recover to last years operating level, 45.28% think it will take half a year to recover, and only 9.2% think it will be normal within three months.

4. Main difficulties faced by enterprises

The biggest difficulties faced by enterprises are tight capital, shrinking orders and high pressure on labor costs (see Table 2). And whether large-scale enterprises or small-scale enterprises, capital shortage is the biggest difficulty faced by enterprises, followed by the problem of order shrinkage, and again the pressure of labor cost is too large.

In the questionnaire survey conducted by the all China Federation of industry and Commerce on May 25, the main sources of cost pressure of enterprises were inquired (see Table 3). The results showed that more than 70% of enterprises thought that the labor cost was high, and nearly 40% of enterprises thought that the rent pressure was high, while the rising price of raw materials and financing cost also brought great pressure to many enterprises.

Table 3: main sources of enterprise cost pressure (multiple choice, data of all China Federation of industry and Commerce)

3u3001 The unemployment problem caused by the difficulties of private enterprises may be gradually exposed

At present, private enterprises are faced with serious problems of insufficient production capacity and order. In order to save labor costs, many enterprises with low resumption rate require some employees to wait for work at home, pay basic living expenses or suspend salary. That is to say, although the resumption rate of most enterprises is not high, they are still in the waiting period, and have not started a large number of layoffs. However, it will soon enter the off-season of sales of various enterprises. If the order situation in June is not reversed, these enterprises with a sharp decline in revenue will no longer wait and start to lay off workers, and the unemployment problem may be exposed in June.

It can also be found in the research report that 42.37% of 413 enterprises are ready to lay off workers (see Figure 7), and the difference between enterprises of different sizes is not significant. 45.42% of the enterprises with a revenue of less than 20 million are ready to lay off workers, 43.66% of the enterprises with a revenue of between 20 million and 100 million are ready to lay off workers, and 36.24% of the enterprises with a revenue of more than 100 million are going to lay off workers. However, the reduction rate of small-scale enterprises is still far greater than that of Enterprises above the designated size. For example, among the enterprises with revenue less than 20 million, 20 million to 100 million and over 100 million, 19.99%, 5.77% and 11.59% of the enterprises with layoffs of more than 20% respectively.

Figure 7: expected layoffs of private enterprises in 2020

Private enterprises and the individual economy have absorbed most of the labor force in the society. Once there is a large area of layoffs and a large range of wage cuts, the tasks of ensuring employment and ensuring peoples livelihood in the goal of six guarantees this year will face great challenges.

4u3001 Current situation of enterprise financing and implementation of financial preferential policies

1. Large financing demand of private enterprises

The research results also show that 93.95% of enterprises need external financing. 76.80% of the enterprises that need financing have submitted financing applications to the bank, and the remaining 23.20% are ready to use other channels for financing. In terms of the current financing situation, the financing obtained by enterprises through various channels can help maintain operation for a very limited time. 40.92% of the enterprises reported that the time for funds to maintain normal operation was less than 3 months, and 30.51% of the enterprises had funds available for operation between 3-6 months (see Figure 8).

Figure 8: the length of time an enterprise can maintain its operation with the financing obtained through various channels

The survey results of the all China Federation of industry and commerce also show that (see Figure 9), the fund demand satisfaction rate of enterprises is not very high, only 14.37% of enterprises whose fund satisfaction rate reaches more than 50%. And the funds counted by the all China Federation of industry and commerce not only include the credit funds of banks, but also the financing obtained by enterprises from non bank channels.

Figure 9: capital demand satisfaction rate of enterprises

2. It is difficult for private enterprises to finance from banks

Figure 10 shows the current situation of private enterprises obtaining bank financing. Almost half of the private enterprises have no loans in the bank. Among the enterprises receiving loans, only 29.81% have obtained bank loans of more than 10 million yuan, and 9.62% have obtained loans of more than 50 million yuan. It can be said that although the financing difficulty of private enterprises is an old problem, it has not been greatly improved under the various credit preferential policies issued by the state. In particular, figure 10 shows that 49.64% of private enterprises do not have loans in banks, which does not mean that they are well funded and do not need bank loans. Only 11.71% of these enterprises do not need external financing, and the remaining 79.11% cannot be approved for bank loans for various reasons.

Figure 10: loan scale of enterprises in the bank as of the survey date

Figure 11 shows the research results of the National Federation of industry and Commerce on the difficulty of enterprise financing. From January to April 2020, 22.30% of the enterprises thought that the difficulty of financing from banks decreased slightly and obviously, 41.55% of the enterprises thought that the change was not big, while 36.15% of the enterprises thought that the difficulty of financing still increased. This shows that although the state and governments at all levels have launched a large number of rescue funds, enterprises have not greatly felt the decline of financing difficulty.

Figure 11: financing difficulty of enterprises from January to April (data of all China Federation of industry and Commerce)

3. It is difficult for private enterprises to obtain credit preference

Recently, governments at all levels have introduced various financial preferential policies to help enterprises rescue. According to the statistics, only 10.90% of enterprises have obtained credit support, 32.45% of enterprises have applied for credit support but not approved, and 44.79% of enterprises are still applying (see Table 4).

Specific to various financial preferential policies, the survey results show that (see Table 5), 10.17% of enterprises have new loans, 15.74% of enterprises have obtained credit extension (no repayment of principal), 8.96% of enterprises have obtained renewal loans (repayment of principal before loan), 12.59% of enterprises have obtained interest relief, only 4.84% of enterprises have enjoyed special loans, and 61.50% of enterprises have not enjoyed any financial preferential policies Policy. The results of the survey conducted by the all China Federation of industry and commerce at the end of May are also very similar. In general, more than 60% of enterprises have not enjoyed any financial preferential policies, and the proportion of enterprises enjoying other preferential policies is only about 10% (see Table 6).

Table 5: implementation of various credit preferential policies (multiple choice)

Table 6: implementation of various credit preferential policies (may survey of all China Federation of industry and commerce, multiple choices)

4. Long term and complicated procedures for obtaining bank loans

Not only the probability of obtaining credit preference is not high, but also the procedure of obtaining bank loan is tedious and time-consuming. The statistical results show that only 13.08% of the enterprises spend less than one month in handling loans (Figure 12), while 86.54% of the enterprises think that the procedures of applying for loans from banks are quite tedious and cumbersome (Figure 13). According to the data surveyed by the all China Federation of industry and Commerce in May, only 20.36% of enterprises obtained bank loans within one month (Figure 14).

Figure 13: Corporate Evaluation of bank loan procedures

5. Lack of collateral is the main reason why it is difficult for private enterprises to obtain loans

The research team also investigated the reasons why it is difficult for enterprises to obtain bank loans. 45.76% of the enterprises think that the mortgage or guarantee is insufficient, 33.9% of the enterprises think that the main reason for not getting loans is not in the list of bank enterprise docking issued by governments at all levels, and 17.43% of the enterprises think that the banks are mainly concerned about the development prospects of enterprises (see Table 7). The May survey results of the all China Federation of industry and commerce also show that insufficient mortgage or guarantee is the main reason for the difficulty of enterprise loans (see Table 8).

Table 7: reasons for the difficulty of enterprise loan

Table 8: reasons for the difficulty of enterprise loan (investigation by all China Federation of industry and Commerce)

6. Private enterprises also face serious problems of accounts receivable

Table 9: accounts receivable of enterprises

1. Basic information on the implementation of financial and tax policies

The results of the questionnaire survey (see table 10) show that at present, the implementation effect of the policy of social security exemption and delay in payment is better, more than 70% of enterprises have obtained preferential policies, followed by the VAT reduction policy, and then the delayed payment policy of provident fund and the rent reduction policy.

Table 10: implementation of preferential financial policies (multiple choice)

2. The reasons for the difficulty in the implementation of fiscal and tax preferential policies

In the questionnaire survey, the research group conducted a questionnaire survey on the main reasons for the lack of preferential policies enjoyed by enterprises, as shown in Table 11. Unclear preferential policies and poor operability are the most common problems reflected by enterprises. There are too many policies and too long documents, but many policies do not have detailed operating rules, specific docking departments and processes. 37.05% of the enterprises reported that they were not within the scope of preferential policies. 30.99% of enterprises think that preferential information channels are blocked.

Moreover, the research team found that for enterprises of different scales, the policy is not clear and the operability is not strong is the main reason for the poor effect of policy implementation. Large enterprises are fully capable of understanding the policy, but 47.82% of the enterprises whose revenue exceeds 100 million yuan also think that the policy is not clear. This shows that it is not the lack of staff to interpret and research policies that makes it difficult for enterprises to enjoy preferential policies, but the design of policies. In addition, different types of enterprises believe that they are not within the scope of the preferential policies is the main reason for the poor effect of the preferential policies, which means that the universality of the policies needs to be strengthened.

Table 11: reasons for insufficient preferential policies enjoyed by enterprises (multiple choice)

3. The preferential range of financial and tax policies is not large

The research team also conducted a survey on the strength of financial preferential policies enjoyed by enterprises. Figure 15 shows that the vast majority (74.33%) of enterprises believe that the current financial and tax preferential policies can only reduce costs by less than 5%, and 16.46% of enterprises believe that the policy preferential policies can reduce operating costs by less than 10%. It can be said that the strength of financial and tax policies is a drop in the bucket for most enterprises.

Figure 15: financial and tax incentives enjoyed by enterprises to reduce the proportion of enterprise operating costs

6u3001 Conclusion

According to the two questionnaires at the end of April and may in 2020, the difficulties faced by private enterprises are very prominent. On the one hand, blood loss (insufficient orders but still need to pay a lot of fixed operating costs) and on the other hand, blood transfusion (difficult financing, little financial and tax preferential policies) lead to many enterprises on the verge of bankruptcy (50.12% of enterprises orders do not 1 month). In fact, the enterprises participating in the survey are all well-known private enterprises in Wuhan. It can be concluded that the overall situation of private economy in Wuhan should be more severe than the survey results.

As mentioned above, July and August have always been the off-season for enterprises. If the business situation of many enterprises does not improve in June, it is likely that they will no longer exist. Therefore, there is a time window to save private enterprises and peoples livelihood, and all kinds of policies need to be fast, accurate and ruthless.

The so-called fast means that the government should act quickly, help enterprises to obtain loans, implement various financial preferences, and help enterprises to continue blood (capital), so as to make enterprises survive.

The so-called quasi means that the policies need to be classified and implemented accurately, so that all kinds of enterprises have a sense of gain. In the survey, no matter the self-employed, small and micro enterprises or medium-sized enterprises are complaining that they are not within the preferential scope of the government, for example, the self-employed and small and micro enterprises think that they can not enjoy the financial preferential policies, the medium-sized enterprises think that they can not enjoy the financial and tax preferential policies or are not on the list of banks and enterprises. This shows that the design of policies may be one size fits all, there is no classification to help enterprises rescue, and the universality is not strong. The so-called ruthlessness means that the policy still needs to be strengthened. At present, many enterprises believe that some preferential policies are small in thunder and rain, few in preference, and complicated in formalities. Therefore, fiscal and tax policies are of little significance for enterprises to reduce operating burden. Now, many private enterprises, small and medium-sized enterprises are faced with the dilemma of no work to be recovered after the resumption of work. The governments rescue policy has been put in place as early as one day, so that the oxygen given to enterprises can be connected, and enterprises can survive and survive. (the author Luo Zhi is director of China new private economy research center, director and professor of Economics Department of Wuhan University, and Li Ying is a civil servant of Wuhan Federation of industry and Commerce) (this article is from surging news. For more original information, please download surging news app). Source: surging news responsibility editor: Wang Xiaowu_ NF

The so-called quasi means that the policies need to be classified and implemented accurately, so that all kinds of enterprises have a sense of gain. In the survey, no matter the self-employed, small and micro enterprises or medium-sized enterprises are complaining that they are not within the preferential scope of the government, for example, the self-employed and small and micro enterprises think that they can not enjoy the financial preferential policies, the medium-sized enterprises think that they can not enjoy the financial and tax preferential policies or are not on the list of banks and enterprises. This shows that the design of policies may be one size fits all, there is no classification to help enterprises rescue, and the universality is not strong.

The so-called ruthlessness means that the policy still needs to be strengthened. At present, many enterprises believe that some preferential policies are small in thunder and rain, few in preference, and complicated in formalities. Therefore, fiscal and tax policies are of little significance for enterprises to reduce operating burden. Now, many private enterprises, small and medium-sized enterprises are faced with the dilemma of no work to be recovered after the resumption of work. The governments rescue policy has been put in place as early as one day, so that the oxygen given to enterprises can be connected, and enterprises can survive and survive.

(this article is from surging news. For more original information, please download surging news app)