Hard-up firms given double boost
Beijing allows delay in social security payments, offers aid to pursue fleeing investors
The mainland will allow cash-strapped companies to defer payments for employees' social security insurance in its latest move to bolster struggling firms amid the global financial crisis.
The Ministry of Human Resources and Social Security issued a directive authorising the firms to defer payments for employees' social security insurance for up to six months next year, while allowing local authorities to cut medical, unemployment, casualty and birth insurance rates, Xinhua said yesterday.
As the crisis led to more factory shutdowns in manufacturing hubs in the south, Beijing urged local authorities to help laid-off migrant workers look for jobs and take proactive measures to drum up domestic demand. 'The repercussions of the global financial crisis are getting worse, many companies are having operating difficulties and hence creating pressure on unemployment,' the government said on its website yesterday. 'As the [Lunar] New Year approaches and many migrant workers return [home], there are new social and urban problems.'
About 700,000 workers have returned to their homes in Hubei, 400,000 to Anhui and 300,000 to Jiangxi and many of them may not return to the south due to the plant closures.
The government also issued a bureau guideline offering legal aid to local businesses in recouping economic losses in case foreign partners vanished.
The guideline stipulates tightened collaboration among four ministries - commerce, foreign affairs, public security and justice - with an aim to minimise economic losses amid a growing number of foreign investors fleeing the mainland over the past few months.
The government conceded that there were cases of foreign investors leaving the country without settling bills and payments, taking a toll on local partners economically as well as disrupting social stability and hurting bilateral trade relations.
The main thrust of the guideline is for foreign shareholders and enterprises to shoulder civil responsibilities in clearing any debts and liabilities, or they will be subject to civil lawsuits.
In cases of huge economic crime and tax dodging, Beijing has reserved the right to seek extradition of the accused for trial on the mainland.
It also offers legal aid for local parties in need of help.
The exodus of foreign investors, primarily manufacturers in production hubs such as the Pearl River and Yangtze River deltas, has escalated amid credit shortages and waning product orders.
In many cases, investors disappeared, leaving behind factories, unpaid workers and tax bills. Many South Korean investors have deserted Jiaozhou, Shandong, while a growing number of Taiwanese and Hong Kong firms are going under in the south.
A case in point is Hong Kong toymaker Smart Union, which Guangdong's Emergency Management Office accused of owing workers back pay and defrauding suppliers of goods and money when its boss disappeared in October.
The saga ended after the Zhangmutou township government in Dongguan used its annual budget to compensate 5,600 penniless workers with 24 million yuan (HK$27 million). Smart Union owed 200 million yuan to 800 suppliers.
Hong Kong Small and Medium Enterprises Association chairman Danny Lau Tat-pong said yesterday a lack of funding to settle payments and the mainland's complicated procedures in cancelling a business venture were major reasons for some producers departing illegally.
'If they have sufficient funds, they would not have vanished and left behind the economic mess,' Mr Lau said. 'Many manufacturers are trapped in a difficult situation and see no way out.'
He said that before a manufacturer could apply to cancel its business registration, it had to clear any export or import tariffs with customs, then settle wages and compensation with the labour ministry and Social Welfare Bureau, pay tax bills, obtain clearance from the environmental bureau and pay off suppliers, landlords and bank creditors. Completion of the procedure took as long as three years, he said.
The Federation of Hong Kong Industries estimated that one in four Hong Kong processing factories would have folded by the end of the year. It said 55,200 Hong Kong plants in the Pearl River Delta employed about 9.8 million migrant workers.
Twin moves aim to bolster struggling firms amid financial crisis
Number of workers at Hong Kong processing plants in Pearl River Delta: 9.8m