(Yicai Global) May 25 -- China's small and medium enterprises face snags in production, sales, investment and receipt of support from localities with staff recruitment and retention also problems, per a report New Hope Group Chairman Liu Yonghao delivered during China’s ongoing Two Sessions legislative meetings.

The study was conducted in February and April by Liu Yonghao, a member of the National Committee of the Chinese People's Political Consultative Conference and chairman of China’s largest animal feed producer New Hope Group. The report, which was based on 7,000 responsive questionnaires, sought to discover the difficulties and problems private firms face and figure out to help them solve these issues, Liu told Yicai Global on May 23.

The first hardship bedeviling China's private firms face is difficulty in production and sales, the survey found. On the supply side, the costs of various means of production are rising across the board, while, on the demand side, Covid-19 has sapped consumption and narrowed profit margins, causing some firms to turn to making masks, disinfectant and other such products, while others have increased their raw material and parts stocks to avert issues in their supply chains and lowered investment, or simply sat it out, waiting for it to blow over.

The second adverse factor is investment. Industry leaders' strong positions make growth more difficult for SMEs and the investment scope available to private capital is too cramped, while the reduction in financing costs among smaller players is not very great.

The third difficulty lies in benefiting from preferential policies. Various local governments have failed to make good on pledges of favorable policies. This is quite common when the senior officials who committed to these initiatives have moved on to other posts.

"Implementing policies to ease the difficulties private firms face is not easy," Liu Xingguo, a researcher at the China Enterprise Confederation, told Yicai Global, adding this is mostly due to two causes. "First, some local governments lack mechanisms ensuring their implementation. Second, the [achievement] targets these policies set exceed the firms' current strength and place their sustained growth under pressure."

SMEs make up a large portion of China's private businesses, Liu Yonghao said, adding services and agriculture firms suffered the worst losses in the epidemic and thus deserve the most help and support, but private firms actually got less counter-epidemic and special funds, new loans and bonds than state-backed enterprises.

A third-party evaluation mechanism should be applied, with the operational status of private firms included into the government performance appraisal, suggested Huang Li, chairman of infrared thermal imaging camera maker Wuhan Guide Infrared, told Yicai Global.

Restrictions on private capital should be eased while the reform efforts should be enhanced, Liu Yonghao suggested. Private firms should be encouraged to become controlling shareholders in general areas and limits on private capital access should be eased to break down hidden barriers to key projects that affect the national economy and people's livelihoods, and emerging sectors of strategic importance.

The Two Sessions, which are the highlight of China's political calendar, started this year on May 22 and will wrap up on May 28 in Beijing.

Editor: Ben Armour