China's small businesses face challenges

China's small and micro-sized enterprises have played a leading role in creating jobs but face daunting challenges as most of them are concentrated in low-profit traditional sectors, an official report showed on Friday.

As of last year there were 11.7 million small and micro-sized enterprises in China, accounting for 76.57 percent of total businesses, said the report, which was released by the State Administration for Industry and Commerce (SAIC).

If taking into account individual businesses, the share would amount to 94.15 percent, the SAIC said.

This is the first official systematic report on such businesses.

While acknowledging that over 70 percent of new jobs were created by small and micro businesses, the report warned of struggles ahead as most of the enterprises are engaged in low-end businesses.

Around two thirds of them are from sectors like industrial, retail, leasing and commercial services that featured low technology, saturated markets and little added value.

For innovative businesses, which took a 4.62-percent share, restraints in capital, technology, talent and management made it hard from them to upgrade and transform their businesses, the report said.

"Generally speaking, small and micro businesses face a less robust growth outlook in the long term," the report concluded.

As China's economy is geared for a more balanced model, small and micro-businesses are having a hard time as some 50 percent reported insufficient market demand and nearly 60 percent perceived rising market pressure.

But despite the challenges, the report said most of the businesses were optimistic about their future.

The definition of what constitutes a small or micro-sized company in China varies by sector. For industrial companies, those with fewer than 300 employees and an annual revenue of less than 20 million yuan (3.25 million U.S. dollars) qualify as small or micro-sized.

The threshold for catering businesses is those with fewer than 100 employees and income under 20 million.

To help small businesses fare better to provide steady jobs, Chinese authorities have taken various policies such as offering tax breaks to ease their burden.

Since Aug. 1, small- and micro-sized enterprises with monthly sales revenues of less than 20,000 yuan have been temporarily exempt from value-added and business taxes.