Reading the economy through small businesses

By Zhang Xiaobo

China's small and micro-business operators offer a valuable window into the real economy. Our long-running survey has collected nearly 250,000 questionnaires, including a large number of unregistered self-employed businesses.

These operators are highly sensitive to macroeconomic changes. Their profit margins, cash flow and confidence readings are closely correlated with indicators such as PMI, CPI and unemployment.

The main pressure facing small businesses today is no longer on the production side. It is weak market demand. Costs are rising, but many small businesses have limited room to raise product prices or wages, which has intensified competition and price pressure. At the same time, their expectations for macroeconomic growth and CPI remain relatively low.

Yet small businesses have shown strong resilience. Many respond by working longer hours and adopting digital tools. Digitalization is bringing structural changes. Online sales and the use of information systems have continued to rise after the pandemic, and roughly one in four small and micro-businesses have already adopted AI.

Digitalization has also helped expand female entrepreneurship. Over the past five years, the share of female entrepreneurs among small business operators has more than doubled from 17 percent to 36 percent.

One important reason is the equalizing effect of online credit: women often enjoy credit-score advantages in digital lending, which has improved their access to financing.

Future policy should shift more toward inclusive measures that improve livelihoods and expand demand. Raising the basic pension for rural elderly residents, for example, could more effectively stimulate consumption and market vitality. At the same time, entrepreneurs need a more stable and enabling environment for development.

AI is also accelerating a trend toward smaller organizations. This will fundamentally reshape employment and social security. China's existing social insurance, medical insurance and related legal systems were largely designed around traditional employment in large companies. They are increasingly out of step with the rise of flexible work, one-person companies, delivery riders and other new forms of employment.

The social security system therefore needs a more fundamental adjustment. A more inclusive protection mechanism would allow residents, including small and micro-business operators, to share more fully in the benefits of technological innovation and development. Only when people feel more secure can they consume with greater confidence and help form a healthier cycle of demand and growth.

Zhang Xiaobo is the chair professor at Guanghua School of Management, Peking University. The views don't necessarily reflect those of China Daily.