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The recent SARS outbreak has largely hurt China's small- and middle-sized firms in the second quarter, said a National Bureau of Statistics report yesterday. The two business confidence indices tracking the business of China's small- and middle-sized companies dropped to below 100 points, which is regarded as the inactive level, in the second quarter. The small companies' index dropped 15.2 percent to 93.1, while that of the middle-sized ones fell 14.2 percent to 99.8 from the previous quarter. "Small private companies are most vulnerable in such unexpected calamity as the SARS epidemic," said Zhang Ren, an official with Shanghai Private Companies Association. "With comparatively small capital base, the companies often face trouble applying for loans, which makes their survival more difficult. They can't expect government-backed redemptions and bail outs like larger state-owned rivals do," Zhang said. Forty-two out of the 69 sectors surveyed saw their business confidence indices decline during the period. The overall index tracking all of the domestic companies dropped 11 percent to 116.6 points. The bureau report showed that the service industry was affected the most by the severe acute respiratory syndrome outbreak in the second quarter. Restaurants saw their business index plunge 80 percent to a record low of 23.2 points. Deterred by the government's travel controls, the travel industry lost more than 70 points. China's private exporters usually sell goods at lower prices than larger state-owned companies, because of more effective cost control, but they turned out to be among the most affected companies. "With lower operating cost, their products used to be pretty competitive in the global market," SPCA's Zhang said, "But since overseas buyers seem to be especially careful during the SARS epidemic, the smaller companies' low-price strategy has become less effective because of a lack of brand awareness." Meanwhile, the bureau said SARS had limited influence on large companies. As a result, a separate survey of 180,000 large-scale companies found SARS only curbed the growth rate in China's industrial output, instead of causing losses. In March, April and May, output of the large companies grew by 16.9 percent, 14.9 percent and 13.7 percent, respectively.