THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT

THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT

2 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT LEGAL NOTICE CPA Australia Ltd ( CPA Australia ) is one of the world s largest accounting bodies, representing more than 155,000 members of the financial, accounting and business profession in 118 countries. ISBN: 978-1-921742-70-5 For information about CPA Australia, visit our website cpaaustralia.com.au First published 2016 CPA Australia Ltd ACN 008 392 452 Level 20, 28 Freshwater Place Southbank Vic 3006 Australia Copyright CPA Australia Ltd (ABN 64 008 392 452) ( CPA Australia ), 2016. All rights reserved. CPA Australia owns all copyright in these materials or uses it under licence or applicable law. For permission to reproduce any material, a request in writing is to be made to the Legal Business Unit, CPA Australia Ltd, Level 20, 28 Freshwater Place, Southbank, Victoria 3006 Australia. DISCLAIMER CPA Australia has used reasonable care and skill in compiling the content of these materials. However, CPA Australia makes no warranty that the materials are accurate and up to date. These materials do not constitute the provision of professional advice whether legal or otherwise. Users should seek their own independent advice prior to relying on or entering into any commitment based on the materials. The materials are purely published for reference purposes alone. CPA Australia, their employees, agents and consultants exclude completely all liability to any person for loss or damage of any kind including but not limited to legal costs, indirect, special or consequential loss or damage (however caused, including by negligence) arising from or relating in any way to the materials and/or any use of the materials. Where any law prohibits the exclusion of such liability, then to the maximum extent permitted by law, CPA Australia s liability for breach of the warranty will, at CPA Australia s option, be limited to the supply of the materials again, or the payment of the cost of having them supplied again.

3 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT OVERVIEW CPA Australia Asia-Pacific Small Business Survey 2015 is the sixth in a series of annual reports measuring small business confidence, the drivers of confidence, technology uptake and access to finance by small businesses. The data is compared across the eight economies included in this survey and over time. In total, 2932 participants completed the survey, including 510 from Australia, 610 from the mainland of China, 265 from Hong Kong, 306 from Indonesia, 310 from Malaysia, 311 from New Zealand, 310 from Singapore and 310 from Vietnam. The online survey was conducted with a random sample of small business owners/managers between 24 September and 14 October 2015. The sample was obtained through panel providers. To qualify for the survey, participants were required to be an owner, a senior manager (defined as being a director, a principal, a CEO, a CFO, a senior manager or a managing director) or a qualified accountant of a business with fewer than 20 employees.

4 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT SUMMARY OF CHINA RESULTS Small businesses in China are positive, innovating and growing their e-commerce presence. CPA Australia s Asia-Pacific Small Business Survey reveals that China s 1 small businesses are growing, they expect China s economy to keep growing, and they have a strong focus on innovation, e-commerce and social media. The focus on innovation, e-commerce and social media is flowing through to business growth, with the number of small businesses from China that grew in the past 12 months at 77.4 per cent, a rise of 12.1 percentage points from the last survey. This strong sentiment is expected to continue in 2016, with 77.7 per cent expecting to grow in the next 12 months (above the survey average of 70.7 per cent). Small businesses in China are some of the most confident in the region, with more businesses reporting growing in the past 12 months than the survey average (68.2 per cent), Hong Kong (63.8 per cent) or Singapore (58.7 per cent). With China s economy being impacted by a variety of factors, including slowing domestic growth (which remains very strong, however) and weak recoveries in the economies of the US, Japan and the euro area, the increase in the number of small businesses that reported growing in the past 12 months shows the resilience of China s small business sector. Such resilience and their focus on innovation, e-commerce and social media should mean that China s small businesses are well placed to take advantage of opportunities emerging from government policies, including the Belt and Road initiative. This strong growth is translating through to the sector being a large creator of new jobs, with 43.1 per cent of China s small business respondents increasing employee numbers in the past 12 months, up from 38.0 per cent in 2014 and above the survey average of 33.1 per cent. The survey results clearly demonstrate that there are very good reasons to be confident in the future of China s small business sector, with China being the second most likely of the markets surveyed to expect to undertake innovation through the definite introduction in the next 12 months of a new product, service or process that is unique to China or the world (31.6 per cent of Chinese small businesses compared with the survey average of 22.0 per cent). Innovation is not the only area in which China s small businesses are among the leaders. China s small businesses also are more likely than most to focus on: growing their e-commerce presence (36.4 per cent of China s small businesses expect to grow their e- commerce presence to a large extent in the next 12 months compared with the survey average of 32.2 per cent) generating revenue from online sales (90.1 per cent of China s small businesses earn at least some revenue from online sales compared with the survey average of 68.9 per cent) social media (97.2 per cent of China s small businesses use social media for business purposes compared with the survey average of 81.4 per cent). 1 All data for China excludes Hong Kong, which is shown separately.

5 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT This very strong focus on innovation, e-commerce and social media means China s small businesses are in a good position to outcompete their less nimble and tech-savvy competitors and remain competitive against rivals from fast-growing neighbouring economies and developed economies. The range of initiatives China s government has implemented or is implementing to encourage innovation, such as the guidelines to promote mass entrepreneurship and innovation and the Made in China 2025 plan, should further inculcate a culture of innovation and entrepreneurship amongst China s small businesses. Such a culture should help drive the next phase of China s astonishing economic growth story. With the survey results demonstrating that small businesses that are innovating, growing their e-commerce presence and exporting are significantly more likely to be growing and creating jobs, this is clearly the right policy approach. China s small businesses are not only growing strongly, creating jobs and preparing for the future they are in many respects shaping the future. Other results from the survey Demographics Respondents from China are typically aged below 40 (59.5 per cent) and the business is 10 years old or less (69.9 per cent). There is a strong correlation between younger business owners and those businesses that expect to grow, sell online, use social media for business purposes, and innovate through the introduction of new products, processes or services. Improved business management China s small businesses were more likely to state that improved business management had a major positive impact on their business in the past 12 months than the survey average (33.3 per cent compared with the survey average of 25.4 per cent). Access to finance Those Chinese small businesses that sought finance in the past 12 months were significantly more likely to find the experience easier than in 2014 (59.3 per cent found access to finance easy or very easy in this survey compared with 33.5 per cent from the last survey). While government policies to encourage more lending to the sector by the nation s banks would have influenced this easing of finance conditions, small businesses in China remain the most likely to seek finance outside of the banking sector. Funding business growth remains the most important reason for accessing external finance.

6 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT MAJOR FINDINGS FOR CHINA China s small businesses, with their strong focus on innovation, are well placed to grow, create jobs and export in 2016 and beyond. With small businesses with an e-commerce presence being more likely to be growing and creating jobs, China s strong focus on e-commerce is a distinct competitive advantage for its business and the economy. With small businesses that expect to grow revenue from exporting being more likely to be growing and creating jobs, more Chinese small businesses should consider having a stronger focus on exporting. With the survey results showing a strong connection between social media use and business growth, the very strong uptake of social media by China s small businesses is a competitive advantage. Reflecting strong business conditions, over half of China's small businesses plan to increase their headcount in 2016. Growth prospects for China s small businesses in 2016 are up while economic confidence remains steady but high. Access to finance became easier for a significant number of small businesses from China.

7 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT KEY SURVEY FINDINGS FOR CHINA INNOVATION China s small businesses, with their strong focus on innovation 2, are well placed to grow, create jobs and export in 2016 and beyond. Small businesses that will in the next 12 months definitely introduce a new product, service or process that is unique to their market or the world 3 Indonesia 45.8% China 31.6% Malaysia 29.0% Vietnam 26.1% Hong Kong 17.7% Singapore 15.2% New Zealand 6.8% Australia 5.1% 2 Innovation, for the purpose of the survey, is taken to be the introduction of a new product, service or process that is unique to a market or the world. 3 All data for China excludes Hong Kong, which is shown separately.

8 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT The relationship between innovation and jobs creation, business growth and exporting EMPLOYEE NUMBERS Percentage that expect to definitely introduce a product, service or process that is new to their market or the world Expecting to increase employee numbers in the next 12 months NOT expecting to increase employee numbers in the next 12 months BUSINESS GROWTH Expecting to grow their business in the next 12 months NOT expecting to grow their business in the next 12 months EXPORTING Expecting revenue from overseas sales to grow strongly in the next 12 months NOT expecting to grow their revenue from overseas sales in the next 12 months

9 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT With China s small business sector being a leader on innovation in the region, small businesses from the nation are well placed to grow and outcompete their rivals from home and elsewhere. To maintain this advantage, more Chinese small businesses should be looking to innovate. With the survey results showing innovative businesses are significantly more likely to be growing, exporting and creating jobs, it is easy to see why China s government is focused on encouraging mass entrepreneurship and innovation, and improving manufacturing innovation through the Made in China 2025 national plan. As a recent OECD paper on innovation stated, in the long run, it is difficult to imagine growth without innovation. The OECD estimates that innovation can contribute up to 50 per cent of economic growth depending on the country, the level of economic development and the phase of the economic cycle. 4 Such an estimate highlights why China s government is absolutely right to have innovation as a core policy focus. Businesses are also more likely to definitely expect to undertake innovation in the next 12 months through the introduction of a new product, service or process that is unique to their market or the world if they: have a business owner/manager aged under 40 have between 5 and 19 staff are in the banking, finance and insurance sector, or the manufacturing sector. KEY FINDING China s small businesses, with their strong focus on innovation, are well placed to grow, create jobs and export in 2016 and beyond. We suggest that those Chinese small businesses that are not innovating should take advantage of the support the government offers to promote innovation. 4 OECD Innovation Strategy: An Agenda for Policy Action, OECD Publishing, Paris, 2015, p. 4

10 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT E-COMMERCE With small businesses with an e-commerce presence being more likely to be growing and creating jobs, China s strong focus on e-commerce is a distinct competitive advantage for its business and the economy. Small businesses that generated revenue from online sales by market 5 Indonesia China Vietnam Hong Kong Malaysia 93.8% 90.1% 85.1% 80.4% 73.2% Singapore 63.6% New Zealand Australia 33.0% 37.0% Small businesses that intend to grow their e-commerce presence to a large extent in the next 12 months by market 6 Indonesia 86.3% Hong Kong China Malaysia Vietnam 42.6% 36.4% 35.2% 33.5% Singapore 19.4% New Zealand Australia 9.6% 8.2% 5 All data for China excludes Hong Kong, which is shown separately. 6 All data for China excludes Hong Kong, which is shown separately.

11 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT The relationship between e-commerce and business growth, jobs creation and exporting BUSINESS GROWTH Percentage that expect to grow their e-commerce presence to a large extent Expecting to grow their business in the next 12 months NOT expecting to grow their business in the next 12 months EMPLOYEE NUMBERS Expecting to increase employee numbers in the next 12 months NOT expecting to increase employee numbers in the next 12 months EXPORTING Expecting revenue from overseas sales to grow strongly over the next 12 months NOT expecting to sell into overseas markets in the next 12 months

12 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT Small businesses from China are among the leaders in generating revenue from online sales. This advantage is likely to grow as small businesses from China are more likely to expect to grow their e-commerce presence strongly in the next 12 months than businesses from most other markets. With the survey results showing that small businesses that are selling online and seeking to grow their e-commerce presence are significantly more likely to be growing and creating jobs, it is easy to see why China s government has innovation as a key policy focus. The focus on e-commerce should also assist Chinese small businesses reduce the impact that rent has on their business, as e-commerce could allow them to take up less floor space, particularly in high rental locations. It could also allow them to better connect with customers, many of whom are becoming increasingly familiar with purchasing goods and services online. While online sales are not relevant for all businesses, when you combine the results that show a strong connection between e-commerce and growth, and growing digital penetration and literacy of customers, the data suggests it would be wise for all businesses to investigate establishing and growing their e-commerce presence. Small businesses are also more likely to earn income from online sales where: they have between 5 and 19 staff the business has been established for less than 21 years the respondent is aged under 40 the business is in the manufacturing sector. KEY FINDING The high degree of focus on e-commerce by China s small businesses is a key competitive advantage for those businesses and the economy. It should also allow many of China s small businesses to better control rent costs and connect with customers.

13 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT SMALL BUSINESS AND EXPORTING With small businesses that expect to grow revenue from exporting being more likely to be growing and creating jobs, more Chinese small businesses should consider having a stronger focus on exporting. Small businesses expecting revenue from overseas sales to grow in the next 12 months by market 7 Indonesia 57.8% 24.2% China Vietnam Hong Kong 15.7% 19.7% 22.3% 46.1% 40.6% 32.8% Singapore Malaysia 17.7% 15.7% 15.7% 15.7% New Zealand Australia 7.1% 6.1% 16.4% 13.3% Grow strongly Grow a little The relationship between exporting, and jobs creation and business growth EMPLOYEE NUMBERS Percentage that expect their revenue from exporting to grow strongly Expecting to increase employee numbers in the next 12 months NOT expecting to increase employee numbers in the next 12 months 7 All data for China excludes Hong Kong, which is shown separately.

14 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT BUSINESS GROWTH Expecting to grow their business in the next 12 months NOT expecting to grow their business in the next 12 months China s small businesses are the second most likely of the markets surveyed to expect to grow their revenue from exporting in the next 12 months; however, they are slightly behind other markets in expecting revenue from exports to grow strongly over the coming 12 months. Given the weak environment in a number of key export markets including the US, the euro area and Japan, such a result is not surprising. With the survey results showing that small businesses that are exporting are more likely to be growing and creating jobs, this focus is a strong competitive advantage for China s small businesses and the broader economy. However, the advantage could be greater if more businesses had a focus on growing revenue from exports strongly. While such an external focus does come with risks, including foreign exchange risks and the potential for downturns in key markets, the advantages of exporting over focusing on the domestic market are significant. A focus on the domestic market limits growth potential and increases the business s risk exposure should the local economy slow. It also means that the business may be less exposed to competitive pressures, which the survey results show may have a negative impact on innovation and growth. Further, the business may be less exposed to new ideas from other markets, which may also negatively impact innovation. With the survey results showing a strong link between increasing revenue from exporting and business growth and jobs creation, it is easy to see why governments across the region are taking action to support and encourage international trade with initiatives such as the Belt and Road initiative and the China-Australia Free Trade Agreement. Small businesses are also more likely to expect strong growth in their earnings from overseas in the next 12 months if: the business is in the manufacturing sector the businesses has between 5 and 19 employees the respondent is aged under 50 the business has been established for less than 21 years. KEY FINDING The focus of many of China s small businesses on exporting is a competitive advantage for them and the economy. With a strong connection between exporting and growth and jobs, more Chinese small businesses should consider a greater focus on exporting as part of their business strategy.

15 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT SOCIAL MEDIA With the survey results showing a strong connection between social media use and business growth, the very strong uptake of social media by China s small businesses is a competitive advantage. Small businesses that used social media in their business by market 8 China Vietnam Indonesia Hong Kong Malaysia Singapore 97.2% 96.5% 96.0% 93.2% 88.2% 79.6% New Zealand Australia 50.2% 56.5% With the survey results showing a connection between social media use for business purposes and business growth, the very strong uptake of social media amongst China s small businesses gives them a competitive advantage, particularly over businesses from Australia and New Zealand where the number of small businesses using social media is significantly lower. With customers being increasingly likely to seek to communicate and transact with businesses via social media, a robust social media presence should enhance a small business s ability to attract, retain and transact with customers. It could also enhance their brand reputation and assist them to grow their business. Those that use social media use it for a variety of purposes including communicating with existing customers, promoting their business to potential customers, and selling their products or services. Small businesses are significantly less likely to be using social media for business purposes where: the respondent is aged 50 or over the business has been established for over 20 years the business has four or fewer staff. 8 All data for China excludes Hong Kong, which is shown separately.

16 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT KEY FINDING With small businesses using social media being more likely to grow, the large-scale adoption of social media by China s small businesses is a competitive advantage that should help generate future growth.

17 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT JOBS AND SMALL BUSINESSES Reflecting strong business conditions, over half of China s small businesses plan to increase their headcount in 2016. Small businesses that plan to increase employee numbers in the next 12 months by market 9 Indonesia Vietnam 66.1% 71.2% China 55.2% Malaysia 46.8% Hong Kong Singapore 27.7% 32.8% New Zealand Australia 16.7% 19.9% Relationship between jobs creation and business growth, innovation, exporting and e-commerce BUSINESS GROWTH Percentage that expect to increase employee numbers in the next 12 months Expecting to grow in the coming 12 months NOT expecting to grow in the coming 12 months 9 All data for China excludes Hong Kong, which is shown separately.

18 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT INNOVATION Definitely expecting to introduce a new product, service or process unique to their country or the world NOT expecting to introduce a new product, service or process unique to their country or the world EXPORTING Expect to grow export revenue strongly NOT expecting to sell into overseas markets E-COMMERCE Expect to grow their e-commerce presence to a large extent NOT expecting to grow their e-commerce presence The jump in the number of Chinese small businesses that are expecting their business to grow in 2016 from 2015 is flowing through to jobs, with 55.2 per cent of Chinese small businesses planning to increase employee numbers in the next 12 months. Other factors contributing to this healthy jobs growth projection include the strong focus on innovation, e-commerce and social media by many of China s small businesses.

19 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT Over the next 12 months, businesses that expect to increase employee numbers are also significantly more likely to: intend to significantly increase their e-commerce presence strongly grow their revenue from overseas sales innovate through definitely introducing a new product, service or process. Small businesses are also more likely to expect to increase employee numbers over the next 12 months if: the business is in the manufacturing, accommodation or food services industry the business has between 5 and 19 staff the respondent is aged under 40. KEY FINDING A stronger focus on exporting by more small businesses in China should lead to more jobs being created.

20 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT BUSINESS AND ECONOMIC CONDITIONS Growth prospects for China s small businesses in 2016 are up while economic confidence remains steady but high. Small businesses that grew over the past 12 months by market 10 Indonesia Vietnam China 57% 63% 70% 34% 8% 26% Malaysia Hong Kong Singapore 51% 49% 55% 9% 12% 14% New Zealand 41% 15% Australia 32% 13% Grown A Little Grown Strongly Small businesses that expect their business to grow in the coming 12 months, 2009 to 2015 by market 100% 90% 80% 70% 60% 50% 40% Vietnam Mainland China Singapore New Zealand Malaysia Indonesia Hong Kong Australia 30% 2009 2010 2011 2012 2013 2014 2015 10 All data for China excludes Hong Kong, which is shown separately.

21 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT Small businesses that expect their local economy to grow over the next 12 months, 2011 to 2015 by market 100% 90% 80% 70% 60% 50% 40% 30% Australia Hong Kong Indonesia Malaysia New Zealand Singapore Mainland China Vietnam 20% 2011 2012 2013 2014 2015 Almost eight in ten Chinese small businesses expect their business to grow in 2016, a 12.0 percentage point increase from their forecast for 2015. Just over three-quarters of respondents from China expect China s economy to grow in 2016, almost identical to the forecast for 2015. This is understandable given the range of pressures China s economy is facing including slowing domestic growth (although it remains very robust), uncertainty over US interest rates, and weaker than expected recoveries in the economies of the US, Japan and the euro area. Small businesses that expect to innovate, grow their e-commerce presence to a large extent and strongly grow revenue from exports are significantly more likely to expect their business to grow in the next 12 months. In addition, small businesses are more likely to expect to grow if: they have between 5 and 19 employees the respondent is aged under 50 the business reported growing in the past 12 months. Further, small businesses are more likely to expect their local economy to grow if: they have between 5 and 19 employees they are in the manufacturing, property or construction sector the respondent is aged under 40. KEY FINDING A stronger focus on exporting should lead to more Chinese small businesses experiencing growth.

22 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT ACCESSING FINANCE Access to finance became easier for a significant number of small businesses from China. Access to finance the percentage that experienced easy to very easy financing conditions in the previous 12 months 11 2015 2014 Indonesia 60.6% Indonesia 56.3% China 59.3% New Zealand 53.7% Australia 54.3% Australia 48.1% New Zealand 50.0% China 33.4% Hong Kong 43.5% Malaysia 32.3% Singapore 34.1% Vietnam 32.0% Malaysia 31.8% Singapore 30.9% Vietnam 29.7% Hong Kong 29.9% Access to finance became easy to very easy for a significantly larger number of small businesses from China in the past 12 months than in 2014. These easier financing conditions do not appear to have had much impact on the demand for finance in the past 12 months. The Australian and New Zealand results also demonstrate that relatively easy access to finance does not necessarily translate into increased demand for finance. While government policies to encourage more lending to the sector by the nation s banks would have contributed towards an easing of finance conditions, small businesses in China remain the most likely to seek finance outside of the banking sector, particularly from venture capitalists, non-bank financial institutions and investors. China s small businesses were most likely to have sought external finance to assist with business growth followed by borrowing to fund the purchase of a capital asset. The number of Chinese businesses that sought external finance for growth jumped very strongly from 2014 (25.1 per cent sought external finance for growth in 2014 compared with 62.4 per cent in 2015). KEY FINDING Accessing finance became significantly easier for many of China s small businesses in 2015. 11 All data for China excludes Hong Kong, which is shown separately.

23 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT APPENDICES CHINA DATA SNAPSHOT Business and economic growth Small businesses that expect their business to grow - China against survey average Chinese small businesses that expect their business to grow against small business growth expectations for China's economy 90% 90% 70% 70% 50% 50% 30% 2014 2015 30% 2014 2015 Survey average China Expect local economy to grow Expect their business to grow 2015 Rank 2015 2014 Rank 2014 2015 survey average Businesses that grew in the last 12 months 77.4% 3/8 65.3% 2/8 68.2% Businesses that expect to grow in the next 12 months Businesses that expect the local economy to grow in the next 12 months 77.7% 3/8 65.7% 3/8 70.7% 71.2% 3/8 71.2% 3/8 61.1% Business activity over the past 12 months 2015 Rank 2015 2014 Rank 2014 2015 survey average Increased employee numbers 43.1% 3/8 38.0% 4/8 33.1% Improved business management had a major positive impact on their business Increasing costs had a major negative impact on their business 33.1% 3/8 N/A N/A 25.4% 38.9% 4/8 N/A N/A 39.0% Required funds from an external source 79.3% 3/8 85.8% 2/8 59.9% Sought external funds for business growth 62.4% 3/8 75.0% 1/8 56.3% Found it easy or very easy to access external finance 59.3% 2/8 33.4% 4/8 47.6%

24 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT Planned business activity over the next 12 months 2015 Rank 2015 2014 Rank 2014 2015 survey average Expect to increase employee numbers 55.2% 3/8 53.1% 3/8 41.8% Definitely expect to introduce a new product, service or process unique to their country or the world Expect to grow their e-commerce presence to a large extent Expect revenue from overseas markets to grow strongly Expect to significantly increase spending on marketing and promotion Expect to grow their investment in assets strongly 31.6% 2/8 N/A N/A 22.0% 36.4% 3/8 N/A N/A 32.2% 15.7% 6/8 N/A N/A 19.1% 27.4% 3/8 N/A N/A 22.8% 21.6% 5/8 N/A N/A 23.1% Definitely will seek external funds 45.2% 3/8 51.6% 1/8 29.2% Expect easy to very easy access to finance 55.2% 2/8 33.9% 5/8 43.3% Expect to seek external finance to fund growth 61.9% 3/8 69.8% 1/8 59.7% Social media and e-commerce 2015 Rank 2015 2014 Rank 2014 2015 survey average Earned revenue from online sales 90.1% 2/8 90.8% 2/8 68.9% Used social media for business purposes 97.2% 1/8 96.1% 3/8 81.4% Demographics 2015 Rank 2015 2014 Rank 2014 2015 survey average Business is 10 years old or younger 69.9% 4/8 80.1% 2/8 65.6% Respondent is aged 39 or younger 59.5% 5/8 67.9% 2/8 53.3%

25 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT Key figures by city (excluding Hong Kong) Beijing Chongqing Guangzhou Shanghai China average Businesses that grew in the last 12 months 76.1% 78.3% 75.6% 79.5% 77.4% Businesses that expect to grow in the next 12 months Businesses that expect the local economy to grow in the next 12 months Increased employee numbers over the past 12 months Plan to increase employee numbers over the next 12 months Definitely will seek external funds over next 12 months Expect to grow their e-commerce presence to a large extent in the next 12 months Expect revenue from overseas markets to grow strongly over the next 12 months Definitely expect to introduce a new product, service or process unique to their country or the world 78% 76% 74.8% 76.9% 77.7% 68.4% 71% 74.1% 71.1% 71.2% 47.7% 45.4% 39.5% 39.7% 43.1% 58.1% 60.5% 57.1% 45.5% 55.2% 60.0% 42.8% 41.5% 36.5% 45.2% 43.9% 38.2% 34.0% 29.5% 36.4% 18.7% 13.8% 19.7% 10.9% 15.7% 41.3% 28.3% 32.0% 25.0% 31.6% Used social media for business purposes 96.8% 97.4% 98.6% 96.2% 97.2%

26 THE CPA AUSTRALIA ASIA-PACIFIC SMALL BUSINESS SURVEY 2015 CHINA REPORT ABOUT THE SURVEY The CPA Australia Asia-Pacific Small Business Survey 2015 is part of a longitudinal annual study of small business conducted by CPA Australia since 2009. This report presents a cross-market comparison between the eight markets surveyed and, where applicable, a comparison of results from 2009 onwards. The survey was conducted between 24 September and 14 October 2015. The mainland of China and Vietnam were included in the survey for the first time in 2014. Indonesia and New Zealand were included in 2011. The survey in the mainland of China was conducted in Beijing, Chongqing, Guangzhou and Shanghai. All data for China excludes Hong Kong, which is shown separately. Interview method In each market, the online survey was conducted amongst a random sample of small business owners/managers. The sample was obtained through online panel provider Research Now and their Asian panel partner ipanelonline. To qualify for the survey, participants were required to be an owner, a senior manager (defined as being a director, a principal, a CEO, a CFO, a senior manager or a managing director) or a qualified accountant of a business with fewer than 20 employees. Sample In total, 2932 participants completed the survey, including 510 from Australia, 610 from the mainland of China, 265 from Hong Kong, 306 from Indonesia, 310 from Malaysia, 311 from New Zealand, 310 from Singapore and 310 from Vietnam. Of the 610 participants from the mainland of China, 155 were from Beijing, 152 were from Chongqing, 147 were from Guangzhou and 156 were from Shanghai. Questioning Questions on small business confidence, employment, social media, costs and access to finance were drawn from previous surveys. Some slight modifications to question wording were made to a number of those repeated questions. Questions on innovation, major influences on the business environment, e-commerce, spending on marketing and assets and exporting are new in this survey. Questionnaires in Australia, Singapore and New Zealand were administered in English. The Hong Kong questionnaire was administered in traditional Chinese, the questionnaire for Malaysia was administered in both English and Bahasa Malaysia, Indonesia s questionnaire was administered in Bahasa Indonesia, China s questionnaire was administered in simplified Chinese, and Vietnam s questionnaire was administered in Vietnamese. Rounding All percentage results shown in this report have been rounded.

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