Under the Several Opinions on Further Promoting the Development of Small and Medium-sized Enterprises announced by the Chinese government, 29 unprecedented measures in eight major areas are put forward to boost the confidence of small and medium-sized enterprises (SMEs) in countering the global financial crisis.

Speaking at the opening ceremony of the 6th China International SME Fair on 22 September, head of the Ministry of Industry and Information Technology (MIIT) Li Yizhong said, “Right now, the problem of SME financing is still acute, the burden on enterprises is heavy, market demand is weak, and the profits of enterprises are dwindling. Thus, more proactive and effective policies and measures must be introduced to help SMEs overcome difficulties, modify their development mode, and achieve healthy and fast growth”.

Hit by the global financial crisis, since the second half of last year, SMEs in China have been experiencing great difficulties in production and operation. In view of this, the central government has introduced timely policies and measures aimed at strengthening fiscal, taxation and credit support for SMEs and improving their business environment. While such efforts have brought about positive changes in the production and operation of SMEs, the situation is still critical.

According to the latest Opinions, as the government strives to stimulate domestic demand, SMEs will be given more opportunities to participate in government sourcing.

The Opinions point out clearly that China will further improve the system of government sourcing in support of SMEs. Efforts will be made to formulate detailed measures for government sourcing in support of SME development, and to raise the ratios of sourcing goods, projects and services from SMEs. Steps will also be taken to further increase the transparency of information dissemination regarding government sourcing and improve the system of outsourcing public services, creating more opportunities for SMEs.

In order to alleviate the difficulties faced by SMEs in raising funds, the Opinions put forward a policy of differentiated supervision of commercial banks which extend credits to SMEs. Meanwhile, private capital will be encouraged to participate in the setting up of joint stock financial institutions such as rural banks and credit companies.

According to Chen Hai, deputy mayor of Maoming city, these measures can provide incentives for banks to offer loans to SMEs and can ease the difficulties of SMEs in financing.

Shen Cai, operator of a small-sized enterprise, reckoned that enterprises can benefit directly from the central government’s efforts to strengthen financial support for SMEs and implementation of tax concession policies aimed at further alleviating the burdens on SMEs. It can be expected that by next year enterprises can lower their costs by about 10%.

The Opinions also point out that SMEs subject to greater pressures under the financial crisis will be allowed to defer payment of social insurance premium or pay a lower premium rate. Where tax concession is concerned, from 1 January to 31 December 2010, small-sized enterprises with a small profit margin and an annual taxable income of Rmb30,000 or below may have their taxable income calculated at 50% and may pay enterprise income tax at the reduced rate of 20%.

Participation of SMEs in the “home appliances to the countryside” plan is expected to increase. Wang Liming, director of the SME Department of MIIT, said support will be given to qualified SMEs to participate in the “home appliances, agricultural machinery, cars and motorcycles to the countryside” plan in a move to encourage SMEs to expand the domestic market.

Li Yizhong remarked that the central government has been increasing its inputs in creating a sound business environment for SMEs. In 2008, Rmb4.9 billion was allocated from the central coffers to support the development of SMEs. In 2009, the amount of such aids is to be raised to Rmb9.5 billion. The money will be spent on encouraging SMEs to undergo technological transformation and assisting them in market expansion.

Li also pointed out that to counter the financial crisis, the State Council has introduced a series of plans, of which those announced in the Opinions on 22 September form an integral part. Embracing new thoughts and new policies, the measures introduced are unprecedented. They include: further creating a sound environment conducive to the development of SMEs, deepening the reform of monopolised industries, expanding the scope of market access, lowering the access threshold for SMEs, and encouraging the participation of private capital in the setting up of rural banks.

SMEs are a major force in China’s national economic development and social development. As at the end of 2008, SMEs accounted for over 99% of the total number of enterprises in the country; the value of their finished products and services accounted for about 60% of GDP; the taxes paid by them accounted for close to 50% of the national total revenues; and they provided over 75% of job opportunities in the urban and township areas.