BEIJING, July 24 (Xinhua) — As the COVID-19 pandemic dampened demand and hurt businesses, China has established protecting firms, especially smaller ones, as a priority from day one, rolling out a host of measures to help them overcome difficulties.
Earlier this week, the country once again pledged to enhance policy support to stimulate the vitality of market entities so that they can not only survive but also thrive.
By 2019, China had around 123 million market entities. The vast majority are micro, small and medium-sized firms, which contribute to over 80 percent of the country’s employment and some 60 percent of gross domestic product, making it imperative for China to shield them against COVID-19 fallout to maintain sound economic fundamentals.
Through tax and fee reductions, China aims to save more than 2.5 trillion yuan (about 357 billion U.S. dollars) for companies throughout the year, according to this year’s government work report.
Since the COVID-19 outbreak, the country has introduced more value-added tax relief, lowered employers’ contributions to social security schemes for old-age pension, unemployment and workplace safety, and refunded unemployment insurance premiums.
Other fee-slashing moves include waiving road and expressway tolls, cutting electricity and gas rates for enterprises and extending the loss carry-forward period from five years to eight years for sectors hard hit by COVID-19, such as transportation, catering and tourism.
The policies not only relieved some strains for micro, small and medium-sized companies but also provided a shot in the arm for their development, said Cai Zhongguang, chairman of Vango Group.
Much applauded by companies nationwide, tax and fee reductions so far this year have topped 1 trillion yuan, official data showed.
The cash crunch is the biggest problem for companies impacted by COVID-19, with over 60 percent of firms polled reporting liquidity issues, according to Zhang Jingqiang, executive president of China Association of Small and Medium-sized Enterprises (SMEs), citing survey results from the association.
In response, China unleashed 1.75 trillion yuan worth of funds by lowering the reserve requirement ratio three times this year, while calling on the financial system to concede 1.5 trillion yuan from their profits this year to benefit companies.
The country has worked to ensure that funds arrive directly at companies’ doorsteps, which is the underlying logic behind its moves to buffer the pandemic’s economic fallout without resorting to broad-based monetary easing.
A case in point is providing financial institutions with 1.8 trillion yuan worth of re-lending and rediscount quotas, while lowering re-lending and rediscount rates.
Analysts say the lower rates will help reduce financing costs for the real economy and unleash the vitality of market entities.
In a similar vein, the country devised two monetary instruments in early June aimed at helping small and micro firms — one for deferring inclusive loan repayments and the other for increasing credit loans. The latter will provide commercial banks with low-cost funds that can be the source of easy-to-access loans for small and micro firms, said Pan Gongsheng, vice governor of the People’s Bank of China.
Some small and micro firms once rejected by banks are now able to receive small loans without collateral or guarantees, which helped ease their liquidity problems, said Zhang, adding that the index measuring how well SMEs are obtaining funds rebounded into the expansion zone in the second quarter of this year. Enditem