China Chart of the Week: Let A Million Companies Bloom
Many China watchers were dismayed by slight weakness in economic data for July, adding to fears that China may still be struggling to overcome a slowdown in real estate investment. However, these concerns do not appear to be deterring people from starting new companies. The State Administration for Industry and Commerce (SAIC) shows that China has added 1.5 million new companies and branches in the first seven months of this year almost double the number of firms added in the same period last year. Over 95 percent of the new firms are private companies, most of which are operating in the service sector. SAIC officials attribute the growth to the removal of registered capital requirements this March. For example, previously individuals had to pay a minimum of Rmb 30,000 to register a limited liability company. A longer view of the data on new firm openings suggests that the growth rate has increased progressively since 2009 with some cyclical weakness in 2012. It is an indicator that while certain areas of the economy are experiencing weakness, the broader outlook for employment and service sector growth remains strong.
Source: State Administration for Industry and Commerce (SAIC)