Technology and innovation drive small business growth in Mainland China
The performance of small businesses in Mainland China saw robust improvement in 2024, reaching its highest level since 2019, according to a new survey by CPA Australia, one of the world’s largest accounting bodies. This improvement is largely attributed to the strong emphasis on technology and innovation among local small businesses.
CPA Australia’s annual Asia-Pacific Small Business Survey reveals that 66 per cent of Mainland China’s small businesses grew in 2024 while 71 per cent expect to grow in 2025. Both results are at their highest level since 2019.
Key contributors to this positive business sentiment include innovation, improved business management and entering new markets. A healthy economy has also positively influenced small business sentiment, with 74 per cent of small businesses anticipating local economic growth this year, above the survey average of 67 per cent.
CPA Australia’s North China Committee President Lloyd Peng said: “The Chinese government’s supportive measures for private enterprises bolstered many small businesses to grow stronger and better last year. Policies such as pretax super deduction for R&D expenditure and VAT exemptions for small-scale taxpayers have helped to foster a stable business environment and encourage businesses to continuously uplift their innovation capabilities.”
The survey shows 88 per cent of respondents from China expect to introduce new products or services this year, 16 percentage points above the survey average. Additionally, 51 per cent forecast that their overseas sales will grow this year.
“Innovation is a core competency among China’s small businesses,” Mr Peng said. “They are good at turning insights on customer needs and emerging trends into new products or services swiftly. I am increasingly seeing small businesses in China specialising in producing novel and unique products, to fulfill both domestic and overseas demand.
“This helps explain why many respondents still believe their overseas sales will grow in 2025. China small businesses with strong capability to provide value-for-money products or services will continue to win customers at home and abroad despite international trade uncertainties.
“They should capitalise the policy-driven opportunities and leverage their unique advantages to attract and retain more customers from new markets especially ASEAN and Middle East countries. They should also be conscious of other challenges along with the restructure of supply chain such as increasing costs from transportation and storage fees.”
The high level of digital uptake by small businesses is having a positive impact, with 68 per cent of respondents saying their technology investments last year improved their profitability, beating the survey average of 56 per cent.
Artificial intelligence (AI) and Enterprise Resource Planning (ERP) software are the technologies that respondents were most likely to invest in last year, with the number of businesses investing heavily in AI jumping 12 percentage points to 42 per cent. Many local small businesses are using AI for advice, with 37 per cent saying they sought business advice from AI tools last year, a higher result than most other surveyed markets.
Hailiang Zhang, CPA Australia’s East and Central China Committee Deputy President, said: “Survey data collected over many years shows that many small businesses in mainland China have significantly benefitted from their investments in technology. This reflects their strong capability to identify and adopt the right technologies to support their growth.
“The rising demand for advanced technologies such as AI agents and robotics by Mainland China’s small businesses is likely to drive continued accessibility and affordability. Government initiatives, such as AI computing vouchers and subsidising data centre costs, are expected to further accelerate the digital transformation of China’s small businesses.”
With technology deeply integrated into their operations, cybersecurity is a priority for small businesses in mainland China. Sixty-four per cent of respondents reviewed their cybersecurity in the past six months, surpassing all other surveyed markets in the region. Due to this proactive approach, only 36 per cent of local respondents expect to be cyberattacked this year, below the survey average of 41 per cent.
Mr Zhang commended small businesses in China for their openness to using AI and their proactive approach to managing cyber risks. However, he emphasised the importance of seeking professional advice.
“Adopting technologies to enhance business performance is a key strength of small businesses in China. But when it comes to developing new strategies or exploring new markets, it’s essential to consult trusted experts. This helps maximise the benefits while minimising the risks, such as navigating different tax rules and compliance obligations in overseas markets. ” he said.
To support business expansion and capital investments, 91 per cent of local respondents sought external funding last year, the highest result among surveyed markets. Half of these small businesses reported that access to finance was easy or very easy, and this positive trend is expected to continue, with 48 per cent anticipating similarly favourable financing conditions this year. Banks remain the primary source of external finance, with a steady upward trend over the past three years.
CPA Australia’s South China Committee Member William Huang said: “Mainland China’s small businesses benefited from more favourable financing conditions last year, thanks to enhanced financial support.
“The government continues to intensify financing support for SMEs and start-ups through a range of policies, including monetary policy guidance, innovative financial products and strengthened financing guarantee systems. Small businesses should take full advantage of these initiatives to enhance their access to funding. At the same time, they can better control their costs by leveraging synergies and forming partnerships with like-minded businesses.”
In response to China’s carbon peaking and carbon neutrality goals and the growing demand for ESG information, 91 per cent of Mainland China’s small businesses dedicated time or resources on ESG-related activities in 2024. A key focus area was the adoption of environmental management system (EMS), with 36 per cent of respondents implementing EMS.
“As many small businesses operate upstream in the supply chain, their customers may increasingly expect them to strengthen ESG management and improve their disclosures,” Mr Huang said. “It is therefore important that they allocate resources to building their ESG capabilities.”
CPA Australia collected 4,236 responses from small businesses in various industries across 11 markets in Asia-Pacific (including Hong Kong, Malaysia, India and Australia) during November to December 2024 for this annual survey, including 757 respondents from Mainland China.
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