Half of Chinese businesses fail within five years

Half of Chinese businesses fail within the first five years and are likely to encounter a bottleneck in three to seven years, according to a report from the State Administration for Industry and Commerce released on Tuesday.

By late 2012, China had a total of 13.2 million businesses. 6.53 million businesses, accounting for 49.4 percent, failed within the first five years; 4.35 million businesses, accounting for 32.9 percent, failed in five to 10 years; 2.35 million businesses, accounting for 17.7 percent, made it past the 10-year mark.

The vast majority of businesses, however, are far more likely to collapse in their third year.

Businesses in different industries have quite different life expectancies.

From early 2008 to late 2012, 1.43 million wholesale and retail businesses closed their doors and 2.49 million businesses in the manufacturing, leasing and commercial service industries were forced to drop out of the market.

The average lifespan for businesses operating in the traditional service industry is currently 6.32 years. The lifespan of businesses in the modern service industry differs greatly due to their different characteristics.

Financial businesses hold the longest life expectancy, averaging at 8.84 years, due to their high threshold and strong competence.

Real estate agencies, accounting for a large proportion of businesses in the real estate industry, with their low threshold and high dependence on economic conditions and real estate adjustments, enter and exit the market quite frequently. As a result, the average lifespan of real estate businesses is rather short, about 4.49 years.

The report shows that mining, power, heating, gas and water-related operations, as well as businesses in public management and social security and social organizations, usually enjoy a rather stable development due to funding, technology and policy limits.

Businesses running community services, repair services, accommodation services and restaurants have a high mortality rate.