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Policies to support Fujian SMEs

By Diao Ying and Tu Lei (chinadaily.com.cn)
Updated: 2009-01-10 15:16

The government is to help local small- and medium-sized enterprises (SMEs) to survive the financial tsunami by offering tax reduction policies and financial opportunities, according to local officials of Fujian in the ongoing provincial political consultative conference.

Banks and other financial institutions will have to set up special department to help SMEs to get loans and give favorable policies for these enterprises, Li Chuan, vice governor of the province, said Friday.

SMEs are the major part of the economy in Fujian province. They contributed 83 percent of the total industrial value of the province in 2007 and 84.6 percent for the first three quarters of 2008, according to official statistics. They are also the major employers of the work population in the province.

But they are particularly vulnerable as the impact of global financial crisis spread and demands in China’s major export markets weaken. Financial institutions who are always favor big companies are more hesitant to lend money to SMEs as they tighten their credit when faced with more uncertainties.

Many such companies have closed in the Yangtz River Delta and Pearl River Delta as the financial crisis takes the toll on Chinese manufacturers. But most of the SMEs in Fujian have stayed safe by now, and no major private-enterprise has gone under now. And the local authorities said they would work harder to help SMEs in 2009, when the situation can be even gloomier.

The local branch of Bank of China has started a new model in Fujian to help small enterprise to get loans faster and easier. Chen Shi, governor of the bank’s Fujian branch, said last year they give a credit line of over 2 billion yuan to local SMEs, and the bank expects to increase that to 3 billion yuan in 2009.

Traditionally, requirements for SMEs to get loans are strict, and they can only use limited resources such as real estate as mortgage. But under the new model, SMEs could use other resources, including its raw materials and orders from clients as mortgages to get loans from banks. Under the new model, enterprise can get loans they applied with five working days, while previously it may take as long as a month.

The government is also to reduce taxes for SMEs. The tax rate for enterprises with annual revenue of 300,000 will be 20 percent, while the standard income tax rate is 25 percent, according to an official from local tax authority. According to the new system of value added tax, which started from January 1, enterprises will also be able to pay less tax if they purchase equipments to upgrade their technology.

The government also encourages local enterprises to finance for their business through other channels. For instance, it also encourages industry association to set up trust agencies, so that enterprises could help support each other to get loans.