15b yuan fund to stop small firms going bust
The central government will set up a 15 billion yuan (HK$18.45 billion) fund as part of a package of measures to avoid widespread closures of small and medium-sized enterprises (SMEs) amid the uncertain global economic climate.
Zhu Hongren, chief engineer at the Ministry of Industry and Information Technology, yesterday said the measures would involve monetary incentives to ease financing difficulties for tens of millions of SMEs, reduce their costs and help them climb the value chain. The measures follow recently introduced fiscal initiatives such as cuts in administrative fees and corporate tax rates.
'With concerted efforts in various government departments, SMEs and small companies should be free from a funds crunch and the risk of going bust,' Zhu said. 'But the existing uncertainty in the global economic landscape and the higher growth rate last year mean industrial output may slow further in the first quarter.'
Growth in industrial output is expected to be hit by slowing demand overseas, weaker domestic consumption, and the big rises in wages and operating costs in the second half of last year. Industrial output grew 12.8 per cent year on year in December compared with a 12.4 per cent rise in November and a 13.2 per cent increase in October. On a full-year basis, industrial output grew 13.9 per cent last year, compared with growth of 15.7 per cent in 2010.
The potential threat of the spiralling euro-zone debt crisis and the wobbly economic outlook for the United States has prompted the central government, and the Guangdong and Hong Kong authorities, to introduce measures to help SMEs.
Hang Seng Bank economists yesterday forecast the mainland's economic growth would slow to 8.3 per cent this year from 9.2 per cent last year, with the export sector to be hit hard as demand in the West slumps.
A Hong Kong deputy to the National People's Congress, Priscilla Lau Pui-king, said measures to help SMEs were needed as small businesses are the pillar of economic growth, jobs and social stability. 'Governments are worried about the SME situation in light of the global economic outlook,' she said. 'More measures will be unveiled after the National People's Congress meeting next month.'
Among Beijing's measures is the 15 billion yuan fund, to be set up by the Ministry of Finance. Zhu said the ministry would put 3 billion yuan a year into the fund over five years.
In export-oriented Guangdong, the government a few weeks ago floated plans to support the province's one million SMEs by lowering their administrative fees and social welfare contributions, offering favourable prices on industrial sites, and helping them access bank financing and new markets.
In Hong Kong, Financial Secretary John Tsang Chun-wah announced in his budget speech last week a loan guarantee scheme under which the government will commit HK$100 billion in loans to SMEs and guarantee up to 80 per cent of a company's borrowing. The Hong Kong Mortgage Corporation plans to set up a HK$100 million fund offering microloans to encourage the self-employed and help cash-strapped start-up companies, while the Hong Kong Export Credit Insurance Corporation will offer discounts of 5 to 10 per cent on insurance premiums to exporters.
SMEs accounted for nearly this percentage of urban jobs on the mainland in 2010, the All-China Federation of Industry and Commerce says