China's Small and Medium Enterprises Index (SMEI) surged to an 11-month high of 51.2 in March, reflecting a positive outlook for the country's economic landscape. This resurgence is a significant increase from the average of 50.7 recorded in January and February, indicating a robust recovery among China's small and medium-sized enterprises (SMEs) post-pandemic.
The non-manufacturing SMEs' performance sub-index edged up to 50, while the manufacturing SMEs experienced a slight dip, falling by 0.7 points from the previous quarter to reach 50.6. Despite this decline, both sectors managed to rebound to expansionary territory in March, with the performance sub-indices climbing to 51.5 for manufacturing and 51.7 for non-manufacturing SMEs.
The expectations sub-indices for both sectors remained at or above 50 on average throughout the first quarter. These indices have largely picked up from the fourth quarter levels, signaling an optimistic outlook among SMEs for the foreseeable future.
The first quarter saw a marked improvement in SME sentiment, with growth momentum inching upward. The outlook for SMEs turned more positive in the first quarter, bolstered by stable economic conditions and a steady ILO Unemployment Rate of 4.4% in the three months leading to January.
However, not all sectors shared the same momentum. Activity in the accommodation and catering sector retreated following the Lunar New Year holidays, reflecting seasonal adjustments rather than long-term trends.
Nearly 95% of surveyed SMEs expressed confidence in a stable USD/CNY exchange rate over the next three months, highlighting a sense of stability in foreign exchange markets. Access to bank credit improved slightly for these businesses, though they faced rising funding costs after a brief decline in February.
The resurgence in SMEI and positive expectations for the future echo a sentiment similar to an age-old economic principle.
"It should not be a matter of tearing up roots but of slowly training a plant to grow in a different direction," quoted John Maynard Keynes.
This analogy underscores the gradual yet steady recovery trajectory that China's SMEs are undertaking.