Hard-hit firms in line for cash aid
The central government says it will take a slew of measures to help the mainland's cash-strapped small businesses, including earmarking billions of yuan in funding, offering tax cuts and opening up microlending to foreign investment.
The government is also researching policies to further support small and microsized businesses because they are playing a pivotal role in the country's efforts to overcome current economic difficulties, according to a statement released after a State Council meeting yesterday chaired by Premier Wen Jiabao .
'Small and microsized firms serve as a significant channel for creating jobs, and as a major platform for the growth and scientific innovation of enterprises,' the statement, posted on the central government's website, said.
Further support for small and microsized enterprises was crucial because they were still facing great operating pressures, rising costs and financing difficulties, it said.
The announcement comes at a time when smaller enterprises are facing increasing financial stress amid a rapidly deteriorating external environment and a slowdown in economic growth at home.
The mainland's small and microsized firms, many of which are export-oriented manufacturers, were further squeezed last year by tightening monetary conditions imposed by Beijing to fight inflation.
The country will strive to relieve financing difficulties for small companies, including setting up a 15 billion yuan (HK$18.5 billion) fund to support small and microsized firms.
The government will provide administrative and financial support to small enterprises seeking a public listing and will ease restrictions on domestic and foreign private capital and international organisations wanting to invest in or establish small financial institutions.
The government said it would also improve fiscal and tax policies to support small and microsized enterprises. It will also push ahead with an existing, small-scale trial to replace the country's business tax with a value-added tax.
The statement said the government would allow greater forbearance on nonperforming loans to smaller companies, a move to encourage commercial lenders to extend loans to them.
Premier Wen paid a visit to Wenzhou, Zhejiang in October after reports of a wave of bankruptcies. About 80 bosses from companies in Wenzhou have fled the city fearing retribution from creditors and some have committed suicide in the past few months.
During the economic downturn, many struggling enterprises, unable to borrow from the state banking system, have had to borrow at cripplingly high interest rates from relatives or loan sharks.
The subsequent collapse of underground credit networks in bustling cities such as Wenzhou prompted fears that the crisis might spread to other parts of the country and lead to a broad financial crisis.