China leads world in new business creation
Pandemic disruption has given rise to more opportunities in major economies
China leads the way in a global study of new business creation, creating 25 million new businesses during the COVID-19 pandemic, driven by the government's entrepreneurialism-focused policy, according to London-based international accountancy network UHY.
China saw the number of new businesses it created grow by 1.25 million last year, giving it first place among 22 countries in the study. UHY's data shows that more than 25 million new businesses were created in China in 2020, up 5 percent on 2019's figure of more than 23.7 million.
Since 2015, China's government has signaled a focus on entrepreneurialism by emphasizing its role in the country's economic strategy, the research noted. In November 2020, the government also stressed the key role small businesses could play in driving China's post-pandemic recovery.
Sun Liqian, director at Zhonghua CPA LLP, UHY's member firm in China, said: "China has made significant strides in fostering entrepreneurialism over recent years and the pandemic has not been able to slow that.
"Enterprise has been a key element of China's economic strategy over the last five years and these figures show how that approach is bearing fruit. There are an astonishing number of micro businesses being created every year in China."
However, the United States experienced a much larger increase in new business creation in percentage terms, a sharp increase of 27 percent, from 3.5 million businesses created in 2019 to 4.4 million in 2020.
UHY said that COVID-19 has triggered a wave of entrepreneurialism in many countries, including the US, as people were forced out of work or put on furlough because of the effects of the pandemic. Industries such as online retail have seen particularly strong surges in new business registrations, as consumer behavior changed because of lockdown restrictions.
This increase in new business creation is also likely to have been influenced by the greater availability of business lending during 2020.
Dennis Petri, chair of UHY International, said: "The surge in new business creation in the US over the past year has been remarkable. Some of this will be down to necessity-people losing jobs and striking out on their own due to a lack of other options. But much more will be entrepreneurs seeing opportunity amid the disruption of the pandemic, particularly in online retail."
In the study, nine countries out of 22 saw significant increases in new business creation in 2020 compared to 2019, including major economies such as the United Kingdom, France, Brazil and India. The largest percentage increase was seen in the Philippines, where new business creation grew 152 percent in just a year.
Michael Aguirre, founder at UHY M.L. Aguirre & Co, UHY's member firm in the Philippines, said: "2020 saw a huge number of registrations of new online businesses in the Philippines. Our economy is rapidly digitalizing and that is creating greater opportunity for entrepreneurs. The money made available to businesses through government-backed loans has also been helpful to many.
"The next challenge is to lower costs and red tape for new businesses in the Philippines. If that can be achieved, we can create an even more vibrant startup economy."
The UK was among the countries to see the fastest rise in new business creation during the pandemic, with a 14 percent increase in new businesses started in 2020, compared to 2019.
Martin Jones, partner at UHY Hacker Young, UHY's member firm in the UK, said: "Entrepreneurs in the UK have really used the pandemic and lockdowns as a springboard to start businesses. COVID-19 has created opportunity for people brave enough to identify and capitalize on the huge change we have seen over the last 18 months."