China’s private sector is trapped in a K-shaped recovery: tech booms while 70% of firms struggle

China's private sector — the engine that once drove decades of breakneck growth — is now wrestling with a painful divide. A fresh survey from the Beijing-based Dacheng Enterprise Research Institute, published in late July 2026, paints a stark picture: while a handful of technology-focused firms are booming, the vast majority of medium- and large-sized private companies are struggling to stay afloat .

The majority view: widespread difficulty

The survey of 79 entrepreneurs found that more than 70% described their current business conditions as difficult or very difficult . Respondents across the board reported narrowing profit margins, persistent survival pressure, and weak market confidence . These aren't small mom-and-pop shops—the survey targets medium- and large-sized private firms, indicating the headwinds are hitting established players hard.

Three key challenges

1. Payment delays and arrears

Nearly 60% of respondents said that mounting accounts receivable had gradually eroded their profits . In some cases, the cash-flow crunch pushed companies into outright financial distress . This echoes earlier findings from the same institute: in March 2026, entrepreneurs were already calling for the government to use treasury bonds and legal obligations on state-owned enterprises to break the country's interlocking debt chains . A 2025 report by the EU SME Centre similarly noted that payment delays remain a structural weakness in the business environment .

2. Weak domestic demand

Consumer spending inside China continues to underperform, dragging down sales for companies that rely on the domestic market . The World Bank's June 2025 China Economic Update flagged subdued demand as a persistent risk , and KPMG's 2026 Q1 monitor similarly noted that the recovery is