How China is supporting Enterprises hit by COVID-19：Analysis

The COVID-19 pandemic has shaken the whole world and has affected the global supply chain immensely. It has hit the businesses worldwide at a scale never seen before with an unprecedented speed. The pandemic caused the closure of many businesses worldwide, the factory outputs have gone so low nearly to 0 where the only option left is to sell the remaining inventory. The disruption of manufacturing globally along with their supply networks is what the world has been witnessing after this epidemic.

Industries like automotive, electronics, medical supplies and equipment, consumer goods, pharmaceuticals and more have been significantly affected. This is a result of China having become a world production center over the past two to three decades. 

China is known as the factory of the world for a reason. China provides bulk of the components, raw materials and well as major subsystems to manufacturers globally. So far the only country in the world to curb this epidemic has been none other than China which is the result of hardcore measures taken by the Chinese government.

Now the companies based in China are slowly getting back to their normal routine and productions but still have been slow due to shortage of labor workers and shortage or parts.

In these times of difficulty, Xi Jinping said, “China will roll out more targeted measures to help small and medium-sized enterprises (SMEs) hit by the COVID-19 outbreak restart production and further develop”.

(Chinese President Xi Jinping, visits an industrial park in Ningbo, east China's Zhejiang province, March 29, 2020. (Xinhua/Yan Yan)

He made these remarks during his visit and an inspection to east China’s Zhejiang province which began on Sunday.

He talked with the managing staff of the park and representatives of SMEs and noted that various industries and enterprises have been affected during the fight against the COVID-19 epidemic.

He announced that a series of policies have been introduced and will be further improved along with the evolving situation of the COVID-19. The government plans to take more targeted measures in order to help out SMEs to restart their production and further develop. 

“We need to rise to the challenges. With the support of the Party and the government, we must stick together through thick and thin to overcome the difficulties”. Xi stressed.

The government from time to time has been announcing various new policies. Here we discuss about some of the circulars provided by the government to support businesses.

◆ February 28, 2020: Announcement about Value-added Tax (VAT) Policies to Support Resumption of Production and Operation of Individual Household Businesses

From March 1, 2020 to May 31, 2020, small taxpayers in Hubei province will be exempted from VAT if their tax rate is set at 3 percent. Small taxpayers in other regions will pay a lower tax rate of 1 percent on taxable sales revenue if their VAT rate is set at 3 percent.

◆ February 28, 2020: Guidelines about Increasing Support to Individual Household Businesses

The guidelines introduced 12 measures to mitigate the epidemic’s impact on small household business owners. Small household business owners who have employees can also enjoy the policy of reducing and postponing social security contributions that was intended to benefit corporate employees. Besides, if the business owners are unable to make registrations for participating in the social insurance plans, they can register after the end of the epidemic and their insurance benefits will not be affected.

◆ March 1, 2020:  Circular about Implementing Provisional Postponement in Principal and Interest Repayment for Loans to SMEs and Micro Enterprises

Epidemic-hit SMEs and micro firms, including small business owners and individual household businesses, can make applications with banks to defer repayment of principal and interest expenses payable from January 25 to June 30, 2020. Overdue loan repayments in the period will not be subject to penalties.

◆ March 10, 2020: Guideline on Preferential Tax Policies for Prevention and Control of Covid-19

The Guideline was originally published on February 10, 2020. The STA updated the Guideline on March 10. According to the document, epidemic-hit enterprises can extend the carryover period of losses incurred in 2020 by eight years; small taxpayers will be exempted from value-added tax for a period; employer contributions in endowment, unemployment, and work injury insurance will be exempted for a period; employer contributions in staff medical insurance will be halved for a period; local governments are encouraged to waive urban land use tax to support landlords to reduce or waive property rents.

◆ March 26, 2020: Circular about Fixing Industry Chains and Pushing for Coordinated Resumption of Work and Production

The Circular calls for relevant governments to implement favorable policies like offering subsidized loans to agricultural firms and small businesses, exempting social insurance payments and housing provident funds for corporate employers, deferring loan repayment deadlines for SMEs, and instructing local companies to make full use of these policies.

◆ March 26, 2020: Circular about Balancing the Fight Against Coronavirus and Economic Development at National Economic Development Zones

The Circular calls for national-level economic development zones to take swift and effective actions to deal with the epidemic and address companies’ problems in investment, production, and business operations. These zones should step up efforts to make sure Chinese and foreign companies can get equal access to Chinese government’s preferential policies and help stabilize important industry chains and supply chains.

By the above circulars we can see the new policies being brought out by the government and how well they have been helping the small and large businesses to be able to get back on track through this epidemic period. 

Sources:

1) http://www.xinhuanet.com/english/2020-03/30/c_138932136.htm

2) https://www.china-briefing.com/news/china-covid-19-policy-tracker-benefiting-business-enterprises-comprehensive-updated-list/

3) https://www.weforum.org/agenda/2020/03/coronavirus-and-global-supply-chains/

4) http://www.china.org.cn/china/2020-03/31/content_75879635.htm

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