Guanghua Thought Leadership
Online Survey of Micro-and-small Enterprises (OSOME): Quarterly Report (2021Q4) (II)



  • In 2021Q4, the purpose of financing, the scale of demand and the main financing channels of micro-and-small enterprises (MSEs) remained similar to those of the last quarter, but the cost of financing increased.

  • Financing has been playing a significant role in maintaining the size of employees for MSEs.

  • Affected by factors such as COVID, the business conditions of MSEs were mixed, and the business confidence index slipped below the 50-point threshold.

  • Despite various unfavorable factors, MSEs stayed resilient and actively responded to challenges by adjusting pricing, hiring and personal employment.

II. Main findings

4. MSEs’ financing needs were stable while financing cost increased

(1) Demand for financing

In terms of financing needs, the proportion of MSEs indicating financing needs has dropped slightly to 66.4%, down 2.7 percentage points from the previous quarter. The need to meet the working capital for daily operations remains the most popular purpose of financing, accounting for 49.4%; the need to expand and purchase new fixed assets takes the second place, accounting for 25.8%, down 2.4 percentage points from the previous quarter, but similar with the figure for the same period last year (2020Q4).

In terms of the amount required for financing, the scale of financing demand in this quarter is close to the previous quarter and significantly higher than 2020Q4. The amount of financing needs for the third and fourth quarters of 2020 and the four quarters of 2021 obtained by the midpoint method are ¥164,000, ¥176,000, ¥178,000, ¥205,000, ¥207,000 and ¥207,000 respectively.

By city size, the financing needs of MSEs in tier 1 and tier 2 cities were greater than those in cities below tier 2 and rural areas, and the gap has widened. By industry, similar to last quarter, the financing needs of MSEs engaged in manufacturing is significantly higher. The needs of agriculture and manufacturing has increased more significantly, while not much has changed in the service industry. By employee size, the financing demand of small-scale MSEs is almost unchanged, while that of larger ones has increased.

(2) Financing Channels

Similar to the previously reported, the major financing channel is MSEs’ own funds or retained earnings, but the proportion has slightly decreased compared with the third quarter. Borrowing from non-traditional banks through online channels, applying for personal consumer loans or using credit cards through traditional banks, and non-friends and family non-institutional private borrowing are the second to forth popular channels, each accounting for about 15%-20%. The percentage of traditional bank business borrowing usage continues to hover around 10%.

By city size and industry, MSEs in large cities are more likely to use their own funds, while manufacturing MSEs are more likely to obtain loans from banks.

(3) Access to financing

After two consecutive increases in the second and third quarters, the proportion of MSEs applying for loans has fallen back despite a further increase in the proportion of online applications. The proportion of MSEs that successfully obtained loans has dropped by 3.0 percentage points compared with the previous quarter. Among them, the proportion of those who received loans online decreased. The average value of the loans obtained has been increasing from 2020Q3 to 2021Q4 (¥159,000, ¥194,000, ¥184,000, ¥207,000, ¥208,000, and ¥210,000 respectively).

The larger the size of MSEs, the higher the percentage of MSEs obtaining financing. Among the two financing channels, online and offline, smaller MSEs significantly rely more on the online channel. For those with zero employees, the proportion of financing obtained from online is nearly three times of the proportion obtaining offline financing. For those with more than 20 employees, the gap narrowed to 1.3 times.

The differences in financing between corporate enterprises and self-employed individuals are highlighted with respect to registration category and financing channel. Corporations borrowed ¥242,000 from friends and relatives, up 26% from the third quarter, while they borrowed from financial institutions ¥255,000, down 42% from the third quarter. The financing from friends and relatives for unregistered and registered individual owners were ¥83,000 and ¥76,000 respectively in the fourth quarter, similar to the previous quarter. However, the financing from financial institutions were ¥66,000 and ¥87,000, a large decrease compared with the previous quarter (¥122,000 and ¥215,000).

In terms of financing costs, the annualized interest rate for financing obtained by MSEs through online loans was 8.6%, compared to 6.8% for offline loans. Financing costs has increased compared to the previous quarter. The phenomenon of higher interest rates for loans obtained online than those obtained through offline continues to exist, and both online and offline loan rates have more significant fluctuations.

(4) Financing to help maintain the scale of employment

Financing helps to maintain the scale of employment. As the main source of employment, MSEs with adequate financing can better serve as a “reservoir” of employment. Most respondents responded positively to the use of loans to maintain the size of the workforce. By size and industry, access to loans is more effective in maintaining the size of employees for larger MSEs and manufacturing MSEs.

5. Confidence for 2022Q1 weakens among MSEs

(1) The confidence index for 2022Q1 has declined as actual performances of MSEs were mixed

The survey shows that the operating conditions of MSEs in 2021Q4 can be described as mixed. In terms of operating costs, there is an improvement compared to the previous quarter, but the actual operating performance in terms of market demand and operating income continue to decline.

For the 2022Q1, the Confidence Index (CI) for MSEs has declined. In terms of market demand and operating income, the Confidence Index (CI) for MSEs is significantly lower than the previous quarter. Following its first breach of the 50-point threshold in 2021Q2, the index has stayed in the optimistic range, but it is lower than the last quarter and approaching the 50-point threshold. In terms of employee size, the confidence index reaches 49.5%, slightly below the 50-point threshold with a pessimistic sentiment. Operating cost confidence is still in the pessimistic range and is slightly lower than the previous quarter.

(2) Heterogeneity analysis of the CI for MSEs

The pandemic has had a significant impact on the confidence and actual performance of MSEs. After classifying cities into no COVID, COVID without lockdown policies, and COVID with lockdown policies, we find that COVID has a significant impact on the confidence of MSEs, especially with respect of market demand and business income. COVID and the lockdown policies have differing impacts on the actual business performance of MSEs in terms of market demand, business income, and size, while lockdown measures may further lower the expectations of MSEs.

By type of ownership, registered individual owners performed worse in terms of market demand and operating income compared to unregistered individual owners and corporations, but are more confident for the next quarter. MSEs’ expectations on operating costs and number of employees are closely related to their size. Compared to the two types of individual owners, enterprises have the worst expectations on operating costs and the best expectations on employee size.

By employee size, the smaller the MSEs, the worse their performance in market demand and operating income, while MSEs with more than 50 employees perform above the 50-point threshold in terms of operating income. Larger MSEs are more pressured about operating costs. Their actual performance in 2021Q4 and confidence in 2022Q1 are lower than those of smaller MSEs with less than 20 people.


Zhang Xiaobo, Kong Tao, Yang Xiaohan, Wang Ranran, Cheng Zijun, Chen Qiuhui, Liu Shuo, Li Zhenhua, Wang Fang, Ma Xiaoyin

Edited by Zhao Ziyi