2017年CRI Draft amendment to SME law calls for more favorable policies

Top Chinese lawmakers reviewed potential legal amendments 2 to help bolster 3 small and medium-sized companies, including potential tax breaks and easier access to financing.

Panel discussions on the draft revisions were held on Tuesday in Beijing at a bi-monthly session of the National People's Congress (NPC) Standing 4 Committee.

"Qualified 5 small and micro-sized companies could have their corporate 6 income taxes and value-added taxes reduced or eliminated. Businesses started by university graduates and army veterans will also enjoy preferential tax policies and reductions in fees. Tax reductions might also be provided to startups, as well as to new companies that are devoted 7 to technological 8 innovation," said Sun Shubao, an official with the NPC.

The official said the amendments also call for policies that provide specific tax deductions 9 for companies that can prove they innovate 10.

China's central government has announced plans to reduce corporate taxes by 1 trillion yuan this year.

Out of the 20 million businesses registered in China, around 98% are small to medium-sized companies. They generate about 60% of China's GDP and around 80% of the jobs. However, obtaining loans has remained a headache for many of these businesses, as China's state-owned banking 11 sector 12 remains 13 reluctant to provide loans to non-government enterprises.

While the current version of the draft does attempt to address the issue, Li Lu, an NPC standing committee member reviewing the document, said the text could be made more specific to ensure easier access to financing for these companies.

"The draft says 'we should encourage and guide banks to provide more loans to small and micro-sized companies.' But the wording is very soft. I suggest we change it to 'we should guide financial institutions to allocate 14 specific percentages of their financing to these companies.' This could force banks to prioritize financial services for these companies," said the lawmaker.

Another goal of the draft is to streamline 15 administrative 16 approvals, delegate powers and improve regulations and services for businesses. A leading government department will be designated to manage SME affairs under the amendment 1. Currently, no such agency has been assigned, meaning responsibilities are not defined, making it difficult to review the law's implementation 17.

Additionally, protecting the legal rights of SMEs is also being considered in the new draft.

"Our current law regarding SME development mainly provides guidance and encouragement but not specific terms of legal protection for these companies. When a company's rights are violated, the law can't come to its aid. I recommend that chapters or terms are added to outline legal responsibilities and provide solutions to conflicts," said Wang Qijiang, another member of the NPC Standing Committee.

Tuesday’s session was the second review of the document, which is subject to future readings before it is codified 18.