China’s SME Performance and Consumer Consumption Spike: October 2023

In the third quarter of 2023, Small and Medium-sized Enterprises (SMEs) in China have shown signs of recovery, as indicated by a marginal increase in the SME Development Index to 89.2. Concurrently, China's Golden Week saw a remarkable surge in consumer spending, notably in tourism and retail sectors.

Key Points

  • SME Development Index: The Q3 2023 Index increased to 89.2 from the previous quarter’s 89, but remained below the expansion benchmark of 100
  • Macroeconomic Sentiment Among SMEs: rose to 98.9
  • Operational Efficiency: The efficiency index for SMEs remains at 74.3, underscoring the operational challenges
  • Golden Week Metrics: 826 million domestic journeys were recorded, representing a 71.3% YoY increase. Tourism revenue reached $104.68 billion, up by 129.5% YoY

SME Development Index

The SME Development Index, a composite measure of the operational health of SMEs, rose marginally to 89.2 for Q3 2023. Although this represents an improvement, the figure is still below the critical 100-point benchmark, indicating that expansive growth remains elusive. Policy measures aimed at stabilizing employment and lowering taxes have yielded some positive results, evidenced by a stable labor index at 106.2.

Macroeconomic Sentiment Among SMEs

The macroeconomic sentiment index, indicative of SMEs’ outlook on future growth, saw a minor uptick to 98.9. Market and investment indexes also registered slight increases to 81 and 83.3, respectively.

Operational Efficiency

Despite the encouraging signs of recovery and consumer spending, SMEs continue to struggle operationally. The efficiency index remains at 74.3, suggesting increased revenue has not translated into increased profitability.

Golden Week Metrics

The Golden Week, an extended public holiday in China, resulted in an uptick in consumer spending. 826 million domestic journeys were recorded during this period, an increase from previous years and a robust 71.3% YoY growth. Tourism revenues reached $104.68 billion, marking a 129.5% YoY increase.

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