Other BriefingsChina Signals More Reforms, Support for Private Businesses
On October 23, six government authorities released an assortment of opinions (Development and Reform Commission (2020 No.1566) on ways to support the growth and reform of private firms in China. Consistent with relief measures rolled out in the months post COVID-19, the document discusses ways to reduce businesses costs, facilitate greater credit support, encourage business innovation and digital transformation, reduce business red tape, and liberalize market access for private businesses.
There were also some new commitments that could benefit private enterprises in the near future. Most notably, the document called for – the equal treatment of private enterprises and state-owned enterprises, such as in the regulation of land-use rights, and a new ‘one business license with multiple locations’ pilot program that could see greater mobility for enterprises between regions.
The document on development and reform comes alongside new survey findings that showed how firms across China have suffered continued financial pressure due to business disruptions even as the pandemic subsided in the country. The survey covered 8,600 enterprises nationwide and reflects their experience over the first three quarters of 2020.
In response, China’s government appears to be signaling to private investors that their concerns are being heard, and that relevant authorities will ensure that a more transparent, equitable and efficient business climate is created, moving forward.
Notable relief measures for private businesses in China
The document provides a comprehensive summary of some of the existing relief measures to support businesses after the COVID-19 outbreak and foreshadow new policies expected.
Stimulating the performance of private enterprises by boosting their vitality and creativity and levelling the playing field between the private sector and SOEs appear to be primary aims.
Some of the notable policies, which received approval of the State Council, and were included in the document are listed below:
Licensing system reformed and streamlined
The central government will back the local government in its efforts to simplify the current business licensing system.
This includes the ‘one business license with multiple locations’, which will remove many of the obstacles to free movement and operation of enterprises between different regions.
Under this pilot program, enterprises will not be required to register in a certain place – except as expressly provided by law. The procedure for establishing a branch office of enterprises will also be simplified.
Consequently, business registration norms, data, and interface will also be standardized to reduce differences between the respective regions in the country.
These pilot measures are aimed at trialing a new system that enhances intra-regional flexibility and free movement of enterprises operating across multiple regions.
Separately, the system of managing qualifications, certifications, and accreditation in established industries will undergo dynamic adjustments – to reduce overly burdensome requirements and preconditions to obtain them.
In addition, the qualification system for industries with new and developing capacities (such as new energy vehicles and commercial vehicles) will be fairly constructed and granted.
Improving the guarantee and supply of resources for businesses
The document guarantees the supply of various business resource elements, such as industrial land supply and talent promotion.
China’s central authorities have called for the equal treatment of private enterprises and state-owned enterprises in obtaining government industrial land use rights, so that small and medium-sized private enterprises can jointly participate in the bidding, auction, and listing of industrial land.
Private enterprises will be enabled to use their land more freely and given extra support if they are engaged in the development of new industries, new business formats, or R&D and innovation.
No additional fees will be charged on land prices where a business seeks to increase the plot ratio in accordance with relevant plans and regulations.
To support human capital and talent – the government pledges to increase the proportion of private enterprises that are able to enjoy special government allowances, and also increase support for training resources for talented professionals.
In this respect, a series of ‘talent remuneration guidelines’ will be released to instruct enterprises to develop an appropriate wage distribution system, according to the characteristics of skilled talents.
Reduced costs for the production and operation of enterprises
The document pledges to simplify the application of preferential policies for epidemic prevention and control and normalize the resumption of production policies that were implemented at the end of the lockdown period.
- For small and medium-sized enterprises severely affected by the pandemic, their applications for tax deferment shall be approved in accordance with the law.
- For small and micro enterprises from January 1, 2020 to December 31, 2021, a full refund support policy will be implemented.
- A phased reduction and exemption of social insurance premiums and lower social insurance rates policies will be made available for businesses in need.
- Further reductions will take effect to lower the cost of electricity for enterprises, and this will be implemented in multiple stages.
- In a continuation of a previous policy, the government will continue to promote the five percent reduction of electricity prices that is available to all large, general, and commercial industries (except for high-energy consumption industries) throughout the year.
State Council ramps up support for private businesses
In China, businesses are now mostly back to normal – operating at full or almost full capacity. This rapid recovery is reflected in China’s Q3 GDP growth rate, which reported a robust 4.9 percent.
However, both, in terms of real and nominal growth, China’s economy is nowhere near its 2019 levels of growth – owing to the lower rates of consumption, global supply chain disruptions, and the impact of ongoing travel restrictions.These have collectively worked as a speed bump preventing full recovery of private businesses and a return to normalcy.
Earlier this month, China’s Small and Medium-sized Enterprise (SMEs) Promotion and Development Center commissioned a report on the challenges currently faced by businesses in China. Of the survey participants – three-quarters were private enterprises (76 percent) and a majority were SMEs (56 percent). The consensus was that many firms still had a strong need for cost reduction policies and wanted the elimination of unnecessary red tape.
Acknowledging this, the government is now seeking to extend and bolster existing preferential policies and to introduce a slew of new measures that will ease the financial burden on the operation of private enterprises, as well as allow for their continued growth, transformation and development in the long run.
Given that this document is relatively vague in nature, and many measures are still at the proposal stage, businesses should pay close attention to successive documents that clarify how the new policies will get implemented. What the document and the timing of its release suggests, therefore, is the government’s intention to listen to private businesses, respond proactively through support measures, and signal forthcoming reforms and preparedness.
For more information on how to avail China’s preferential policies to ease doing business in the country, please feel free to contact us at china@dezshira.com.
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China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
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