Firms can survive, thrive in outbreaks

A vast number of private enterprises, especially private small and medium-sized enterprises, have been hit hard by the sporadic but frequent COVID-19 outbreaks and suffered the consequences of the strict measures taken to prevent the spread of the novel coronavirus.

How can the SMEs overcome these challenges and thrive again?

Facing the huge difficulties, the SMEs may have no choice but to adopt innovative methods to run their businesses. However, the government still should make big efforts to build an environment more conducive to the growth of SMEs.

As for private enterprises, they should understand the operating mechanism of the market economy so they can better meet the challenges. Since the conditions favorable to rapid growth no longer exist, SMEs should strive to achieve high-quality development, and the private entrepreneurs should adapt to the new development trend, in order to seize the opportunities to elevate their enterprises' development to a higher level as the increase in infection cases will lead to structural regrouping and re-organizing of industrial chains.

In fact, enterprises can seek opportunities even during hard times, by promoting and applying innovations. For example, enterprises can use such a time to update their equipment and machinery, or to increase their scale.

It is especially important, however, to view the impacts of the pandemic dialectically. Rather than seeing it purely from a negative angle, we should try to turn it into an opportunity to innovate and upgrade the economic structure.

The government has issued a series of policies to support private enterprises, especially private SMEs. And while the enterprises should take the initiative to understand relevant policies and get the maximum benefits out of them, the government should strive to create a favorable environment for private enterprises.

First, the government should implement supportive policies aimed at reducing the burden on the enterprises, and the departments concerned must supervise the actual implementation of preferential policies, especially those on corporate financing.

Also, there is a need to establish special funds to support the development of private SMEs and the financial institutions that specifically serve private SMEs, introduce detailed rules, including on how to fulfill due obligations in case a company fails to repay a loan, and intensify the supply-side structural reforms in the financial sector.

Second, it is vital to strengthen guidance and achieve breakthroughs in different areas to help private enterprises resume normal production and other economic activities, so that a large number of migrant workers who couldn't travel to their workplaces and enterprises that couldn't recruit new workers could do so now.

Besides, the division of labor is becoming increasingly fine, and a lot of new links have been added to the industrial chains. As a result, if a problem occurs in the middle link of the industrial chains, or if the middle link is blocked, it will be extremely difficult for the upstream and downstream links to function, let alone continue normal production. To resolve such issues, the government must intervene and create conditions conducive to clearing the blockages and connecting the broken links.

Third, it is necessary to boost domestic demand, which will not only promote economic development, but also help build and/or strengthen the industrial chains that have been blocked in the global markets.

When it comes to domestic demand, it can be boosted in two ways: by increasing investment and by expanding consumption. For example, the government and enterprises can issue consumer coupons to prompt people to increase their consumption. Domestic demand can also be raised by creating more jobs, which would raise people's incomes, prompting them to spend more.

And fourth, it is important to create a more favorable business environment, because a good business environment can have an agglomeration effect on society with low production costs, good government services and low transaction costs.

All enterprises should be treated equally and social resources used fairly; enterprises' property rights and other rights should be more effectively protected; a culture that encourages innovation and tolerates failures is encouraged; and infrastructure facilities are sound.

China's good business environment has paved the way for the births of hundreds of thousands of successful entrepreneurs, which in turn have helped improve the business environment further. And these entrepreneurs can also help the companies to overcome the impacts of the pandemic.

The author is a professor at the School of Economics, Renmin University of China. The views don't necessarily represent those of China Daily.

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