SMEs are undoubtedly the businesses that have received the short end of the stick when it comes to the COVID-19 pandemic. These smaller organisations have experienced the most drastic financial fallout in comparison to larger organisations. SMEs in APAC contribute a significant portion of the region’s economic growth, accounting for over 97 percent of all business and employing more than half the working population.
A similar picture can be seen in China, Asia’s largest and most profitable economy. Like all other nations in the region, China’s SMEs have also been struggling to survive the pandemic and lockdown orders that have been implemented. Despite being the most economically successful country in APAC, the severity of the economic downturn was too much even for Asia’s business juggernaut. With the local economy hampered, it has been revealed that up to half of Chinese SMEs do not have the cash flow to last longer than three months.
This revelation comes at the behest of the Center for Enterprise Research of Peking University, whose ‘Enterprise Survey for Innovation and Entrepreneurship in China’ also revealed that 14 percent of the 2,349 SMEs surveyed only had cash flow to last a month at most.
Like many other APAC nations, China’s SMEs account for a staggering portion of the country’s economy. Up to 90 percent of China’s total employment and 80 percent of it’s export-ready output is contributed by SMEs. Some research have claimed that the complete loss of all these SMEs could result in a devastating loss of up to 70 percent of China’s GDP.
Recognising the crippling effect losing these SMEs could have on the local market, Chinese e-commerce titans Alibaba and JD.com appear to have stepped up to provide relief assistance for these smaller players.
Alibaba has always had a close working relationship with smaller underdog companies. In April, the company had already revealed its 2020 Spring Thunder Initiative, committing to help export-focused SMEs expand into new markets through its e-commerce ecosystem. The e-commerce giant is also in the process of pushing digital transformation efforts for SMEs via its various subsidiaries. In addition, the company is also making use of its financial arm to offer contact-free loans via its virtual merchant bank to “tens of millions” of small and micro-businesses.
In addition, its cloud services affiliate Alibaba Cloud is committing hundreds of millions of dollars to assisting partner businesses and hiring more talent.
“We must band together with the SMEs that need the most help, and convert Alibaba’s resources into strength for the SMEs. We must turn the ‘danger’ brought about by the pandemic into ‘opportunity’ for SMEs to prepare for the future through digital transformation. Now is the time for Alibaba to give back to our community and to give back to our SMEs,” said Alibaba Group Chairman and CEO, Daniel Zhang.
Like Alibaba, e-retailer JD.com is aware of the many nigh-impossible challenge of reinvigorating and stabilising the economy without the backbone of SMEs. Two months back the sportswear website revealed its Spark economic incentive plan for SMEs, stall operators, and shopkeepers.
The program is expected to service millions of convenience stores and stalls, providing supply chain and service support for the employment of more than 5 million people.
“JD has both the ability and the responsibility to use digitization to support and make the economy of small stalls and shops more dynamic, helping to further invigorate the overall economy and stabilise employment,” said Lei Xu, CEO of JD Retail.
JD will also be assisting offline retailers by providing end-to-end support to digitise their businesses as well as providing them easy access to low-cost supplies. With this kind of support, prospects remain hopeful for China’s SMEs on the road to recovery.