The number of businesses in China is growing faster than any other major economy in the last year, as it has shrugged off the impact of its economic slowdown, reveals a new study by UHY, the international accounting and consultancy network.
According to UHY, there has been a 19% increase in Chinese business numbers in the last year. There were over 26 million Chinese businesses in total in 2016 compared to almost 22 million in 2015 (see table below).
In comparison, the major “Western”* economies studied saw their number of businesses increase by just 2% last year compared to the previous year.
Overall across all countries in the study (21), business numbers in 2016 increased by 8% on the previous year.
UHY says the figures suggest efforts to grow the consumer economy in China and policy moves to boost entrepreneurship to drive growth have paid off.
Bernard Fay, Chairman of UHY, comments: “Enterprise and entrepreneurship in China have been gathering pace at impressive speed. This reflects a shift in emphasis from state owned businesses to smaller, privately-run companies that is gaining momentum.”
“China’s ambitious growth plans have continued to yield results. Investment to deliver better transport networks, digital infrastructure and enterprise support has helped encourage new business creation as well as supporting existing businesses to succeed.”
Yong Sun, Board director at UHY and Managing partner of UHY member firm, ZhongHua Certified Public Accountants in China, says: “China’s growth may have moderated in recent years, but its GDP is still increasing faster than most other countries and new business creation is thriving as a result. Maintaining this momentum is likely to remain a key priority for policymakers.”
EMERGING ECONOMIES TOP THE GLOBAL RANKINGS LEAVING WESTERN RIVALS BEHIND
The Top 5 rankings in the UHY table for growth in business numbers are dominated by emerging economies. India is, in fifth position with an annual increase of 7% to 1.1 million businesses in 2016 (1 million in 2015).
Of the Western economies studied, the UK is first, coming 6th in the UHY table. Numbers of businesses in the UK increased by 6% in the last year, with 218,000 more businesses taking the total to 3.9 million.
Greater access to alternative sources of finance such as crowdfunding and P2P lending may be opening up more opportunities for would-be British entrepreneurs. Falling rates of corporation tax have also helped ease the pressure on small businesses and their owners: the UK has one of the lowest levels in the G7 at 19%. However, whether Brexit will slow the rate of growth going forward remains to be seen.
The US increased its stock of businesses by 2.1% to 11 million companies, while Japan saw an increase of just 1.7% in 2016, to make a total of 5.4 million businesses.
Bernard Fay adds: “Many developed economies often do not have the same scope to grow new businesses at such rapid rates found in China and developing countries.”
“It is important to remember that the US is still the world’s leading economy and that Japan’s economy recently expanded for seven quarters in a row – the longest period of growth in more than a decade. However, policymakers in these developed countries will still want to look for additional ways to keep pace with other similar, high-performing economies like the UK.”
Germany, widely seen as Europe’s economic powerhouse, saw business numbers grow by only 1%, lagging behind most other European countries in the study including France, Spain and Ireland. It increased its stock by 34,000 companies taking the total to 3.5 million.
Thomas Wahlen & Partner, Board director at UHY and Partner at UHY member firm, UHY Wahlen & Partner, comments: “Germany’s low unemployment rate may be a factor, as job losses can often provide the catalyst for new business start-ups, encouraging more people to strike out on their own.”
“The pressure of red tape and tax on businesses may also be impacting on success and there is room for greater policy commitment to support entrepreneurialism. However, the government is making improvements in many areas including infrastructure, public funding programmes and intellectual property rights, setting good conditions for the future.”
CHINA TOPS TABLE FOR PACE OF GROWTH IN BUSINESS NUMBERS – INCREASING TOTAL STOCK BY ALMOST A FIFTH IN A YEAR
*France, Germany, Italy, Japan, UK, United States
Notes on the figures (rounded to the nearest thousand):
Japan – 2015 figure is an estimate based on 2014 and 2016 figures; UK – figures have a year-end of 31 March 2016 and 2017, and are figures from UK’s Companies House on new incorporations and dissolved companies; Germany – 2016 figure is an estimate based on new registrations and de-registrations for 2016; Belgium – figures are for 2014 and 2015, the most up-to-date figures available; Vietnam – 2016 figure is an estimate based on annual growth rate 2010-15; Australia – Year end June 30 June 2015 and 2016; Pakistan – figures are for fiscal years 2015-16 and 2016-17 and measure the number of companies registered with the Securities and Exchange Commission of Pakistan (SECP).
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