China tries to boost support for small businesses through taxes, loans
Value-added tax concession extended and reserve requirement ratios of commercial banks to be lowered to encourage lending
Beijing is trying to boost support for small businesses saddled with higher financing costs because of its deleveraging campaign, and amid Washington’s plan to cut corporate taxes.
China’s cabinet on Wednesday extended the value-added tax exemption policy for companies with monthly sales revenue of less than 30,000 yuan (US$4,520) for three more years.
The State Council also cut reserve requirement ratios for commercial banks and it will strengthen financing guarantee agencies – with a national loans guarantee fund to be set up – to help small businesses obtain loans at a lower cost.
“Increasing the fiscal and financial support for small and micro firms … is a good way to boost employment, generate new growth opportunities and invigorate the economy,” the cabinet said in a statement.
The vast majority of China’s workforce is employed by small and medium-sized firms, meaning they are an important factor in maintaining social stability. These businesses are also vulnerable to the slightest changes in the market – such as declining Christmas orders, money rate rises or unexpected tax bills.