Chinese authorities are stepping up support for micro-sized, small and medium-sized enterprises (MSMEs), making it easier and cheaper for them to get financing, as part of a broader move to draw up detailed measures to back the private economy.
The Ministry of Finance and the State Taxation Administration on Tuesday and Wednesday issued six notices targeting different entities and enterprises with major focuses on tax reductions and exemptions.
For instance, interest payments on small loans for such companies and individual entrepreneurs will be exempt from valued-added tax. The tax break in this case and others will be effective through the end of 2027.
Experts highlighted continuing efforts by Chinese authorities as examples of detailed measures following the recent issuance of guidelines and policies to boost the growth of private enterprises.
MSMEs make up the majority of China’s market entities, but they are facing financing difficulties. Many were established only recently, so they don’t have a long track record of profits and have fewer assets to use as collateral, Cong Yi, dean of the School of Marxism at the Tianjin University of Finance and Economics, told the Global Times on Wednesday.
The notices issued by the Ministry of Finance and the State Taxation Administration will ease the burden of enterprises seeking financing, while the extension of policies to 2027 will offer more convenience for targeted firms, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China, told the Global Times on Wednesday.
Dong stressed the importance to further lower the threshold for more enterprises to reduce the cost and timing of their financing, as they can utilize the savings for future development.
Both Cong and Dong stressed the significance of tailoring policies for different sectors as MSMEs in each industry face different obstacles.
On Tuesday, five Chinese authorities issued a joint notice in a bid to promote financing for MSMEs. The notice called for the creation of a mechanism connecting the responsible authority, enterprises and financial institutions targeting industrial enterprises in the manufacturing sector with supportive measures covering various aspects in financing.
The mechanism aims to better gauge the financial demand of corresponding enterprises and provide targeted and diverse support measures, making financing more convenient and accessible for qualified companies.
The notice highlighted giving full play to responsible government authorities to fulfill their responsibilities, such as forming dedicated services teams to solve financing difficulties, mapping out operational conditions and measuring the companies’ interest in getting listed.
Some local governmental authorities have done in-depth research when attracting investment and have set up funds to support the development of local innovative enterprises. In such cases, local governments have already identified risks in the process of attracting investments, which will help reduce the risks for financial institutions, a banking staffer noted, according to news site jiemian.com.
The implementation of guided policies will help ease the burden for MSMEs in the short term, while it is also important to study policies for the long run, according to Cong.
On July 19, the Communist Party of China Central Committee and the State Council issued a guideline to spur the growth of the private economy, following which responsible authorities have been implementing the guideline with detailed measures and policies.
Eight Chinese ministries on Tuesday issued 28 measures to support the private economy, vowing to provide fair access for private enterprises to participate in major national projects and technology undertakings, and increase financial and land support, along with other aspects.
(Global Times)
