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Brink of Bankruptcy

China Economic Weekly April 15, 2020

By NewsChina Updated Jul.1

Official data shows that China’s private sector, which is mainly composed of small- and medium-sized enterprises (SMEs), contributed more than 50 percent of tax revenue, 60 percent of GDP, 70 percent of technological innovations and 80 percent of urban employment in 2018. Since the outbreak of Covid-19, many SMEs are on the brink of bankruptcy due to the rising costs of labor, logistics and raw materials coupled with a sluggish market. According to Tianyancha, a data platform with Chinese enterprise information, more than 460,000 enterprises nationwide went bankrupt in the first quarter of 2020. The central government released a package of preferential policies targeting SMEs such as rent reductions, subsidies for employees and discount vouchers to stimulate spending. Experts cautioned that stimulus measures have to be implemented as soon as possible and a proper mechanism has to be established in order to prevent a one-size-fits-all approach and to eradicate fraudulent use of subsidies.