South China’s small businesses lead Asia Pacific in innovation, technology

Small businesses in South China generally experienced positive business conditions in 2018, with several from Guangzhou experiencing high growth, according to a survey conducted by CPA Australia, one of the world's largest accounting bodies.

Mr William Huang, President of CPA Australia South China Committee, introduces the findings of Asia Pacific Small Business Survey 2018

These positive conditions are expected to continue in 2019 with Guangzhou's small businesses again set to lead the growth. This reflects the resilience and capability of South China's small business sector in the face of a potentially uncertain and challenging year.

Key to this is the very strong focus on innovation and technology by small businesses from Guangzhou and Shenzhen - with the survey results showing that small businesses in those cities not only leading the rest of Mainland China in the use of many technologies, but also leading small businesses from the Asia Pacific. Further, the survey results also show a clear link between innovation and technology, and strong business growth.

The findings from CPA Australia's 10th annual Asia-Pacific Small Business Survey follow extensive surveying of more than 3,600 small business operators in ten markets, including Australia, mainland China, Indonesia, Malaysia and the Philippines.

With 77 per cent reporting that their business grew in 2018 and 46 per cent increasing the size of their workforce, Guangzhou's small businesses experienced the most positive conditions in Mainland China among the surveyed cities. The positive sentiment in Guangzhou is likely to continue, with nearly 80 per cent of small businesses expecting their business to grow in 2019 and over half expecting to increase their headcount.

Mr William Huang, President of CPA Australia South China Committee said that under a challenging environment caused by trade tensions and other issues, small businesses in South China generally performed strongly last year and show confidence in both the local economy and their business growth in 2019.

"I believe this confidence is built on their leading position on the utilisation of digital technologies in their business and their innovative culture. The survey findings in the Asia-Pacific show that high levels of adoption and utilisation of digital technology is one of the most positive influencers to drive business growth," he said.

"We are not surprised that the small businesses in this region have strong confidence since the Greater Bay Area is one of the central engines of economic growth in Mainland China, with world-class innovation and technology at its core.

"Both Shenzhen and Guangzhou are the top performers in the Asia Pacific for online sales and are also leaders in the adoption of new digital or mobile payment methods in transactions. Over 80 per cent of businesses in both cities are earning over 10 per cent of their revenue from online sales, and nearly nine in ten businesses generate more than 10 per cent of their sales through new payment technologies.

"Further, we are delighted to find that small businesses from South China are quite sophisticated in the technologies they are investing in and adopting in their business. The survey findings show that they not only have a strong capability to identify the suitable technologies to invest for their short-term returns but also have an eye on the future and their customers, with respondents in South China being the most likely to have invested in Artificial Intelligence (AI) and customer relationship management (CRM) software among all markets surveyed in the Asia-Pacific."

Increasing cost, especially staff costs, is the factor that is most likely to have had a negative impact on businesses in South China in 2018, with nearly 60 per cent of respondents in Guangzhou stating that staff costs was the cost most detrimental to their business, ranking top in the surveyed markets.

"On the one hand, small business owners are facing increasing costs such as staff costs, on the other hand, they are having difficulty recruiting suitable staff to support their business growth," Mr Huang said.

To solve this dilemma, CPA Australia suggests that small businesses revisit their company structure and cost structure and seek to improve their business strategy and operating model.

"The development of the Greater Bay Area should accelerate people movement throughout its 11 cities and attract non-local talent to the area. Taking advantage of this development and new technologies, which are changing the way people work, provides opportunities for small business owners to get the staff they need to grow their business. However, this may require a change in how businesses engage talent, for example, offering more flexible and mobile work conditions to attract and retain the right skill sets from anywhere in the Greater Bay Area, or collaborating with a distant team or freelancers.

"In addition, through the interconnection of cities in the Greater Bay Area, there are opportunities for financial institutions to work together to create a better business environment for small businesses in South China to access to finance and support their further growth.

"The slowing global economy and economic uncertainties are making 2019 a challenging year for small businesses in South China, however, CPA Australia remains positive. Strong domestic consumption in South China supported by recent tax cuts, the region's leading capabilities in innovation and technology, government policies to improve SME access to finance, and emerging opportunities from the Greater Bay Area plan, make us confident that South China's small businesses will continue to grow and stay vibrant," Mr Huang said.

CPA Australia has six tips for China's small businesses in 2019:

  • Look for government incentives that are supportive of innovation
  • Seek advice on which technologies are best suited for your business before investing in those technologies
  • Use big data analytics to analyse your customers to further improve customer satisfaction
  • Explore opportunities in Greater Bay Area, emerging economies on the Belt and Road and other fast-growing markets in the Asia Pacific region and Africa
  • Invest in improving strategic and managerial skills
  • Undertake a strategic review of your cost structure and potential business risks.

CPA Australia

CPA Australia is one of the world's largest accounting bodies with more than 164,000 members working in 150 countries and regions around the world, and with more than 25,000 members working in senior leadership positions. It has established a strong membership base of more than 18,000 in the Greater China region.

CPA Australia Asia-Pacific Small Business Survey

The CPA Australia Asia-Pacific Small Business Survey provides annual insights into the views of small businesses across the region and forms part of a longitudinal study that began in 2009. The 10th CPA Australia annual survey comprised extensive surveying of 3607 small business operators in ten markets, including Hong Kong, Mainland China (Beijing, Guangzhou, Shanghai, Shenzhen and Chongqing), Taiwan, Malaysia, Vietnam, Indonesia, Singapore, the Philippines, Australia and New Zealand.

Market Summary - China

Asia-Pacific Small Business Survey

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