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Based on a large Online Survey of Micro-and-small Enterprises (OSOME) conducted in March 2021 on micro-and-small enterprises and self-employed businesses (MSEs) operating on the Alipay platform, this paper examines the operational status, challenges, responses, and confidence of MSEs after exposure to the COVID-19 pandemic for over a year in China. The operational status of micro-and-small enterprises has significantly improved despite cash flow constraints. Rising costs and weak demand were two key challenges. In response to the COVID-19 shock, a higher percentage of newly established businesses adopted online sales and electronic information systems than those established earlier. Tax reduction was the most inclusive type of policy support. The confidence indices on market demand, production, and revenues for the next quarter returned to positive territory, indicating an optimistic outlook. The employment index remained just below the normal level, suggesting subdued expectations of expanded employment in the near future.

One year after COVID: the challenges and outlook of Chinese micro-and-small enterprises