Unchaining SMEs

Jun 14-2022   

Inflation deserves attention, but the most worrying issue is the drastically compressed profitability of small and medium-sized enterprises (SMEs), said Prof. Huang Yiping, Associate Dean of the NSD, in a media interview during the 61th edition of China Economic Observer.

The Russia-Ukraine conflict has added fire to an already surging global inflation. Due to chain effects, inflation in China has reared its head, reaching 2.1% in April after months of uptick. Chinese manufacturers have been locked in a conundrum, as prices of inputs continue to rise while consumer prices remain weak. Prof. Huang said that SMEs at the middle and lower reaches of manufacturing are particularly vulnerable to such a mismatch. Their uphill battle for recovery signals the tremendous pressure of the economy to shake off the slump.

Prof. Huang believed the macro-economic policy can pack more punch in its stimulation package, such as doling out aids straight to enterprises and residents.

That the Federal Reserve has tightened its monetary policy has led to dwindling liquidity in the international financial market and is likely to cause such problems as capital outflows, currency depreciation, and decreased asset price for many countries, including China. This has further constrained China’s maneuvering room at a time when it needs loose monetary policy to achieve economic stability.

Considering internal and external factors, Prof. Huang advised that more should be done to rein in the pandemic as soon as possible to reduce its effect on economic activities; in addition, though policy signals have been sent out to stabilize growth expectation, a more powerful policy or project, be it fiscal or monetary, could be adopted to boost market confidence.