China to further ease burdens on small business

State Council moves to ensure stability of the ongoing economic recovery

The State Council's decision to curb arbitrary charges on enterprises will further slash corporate burdens amid the fallout from the COVID-19 outbreak and enable ongoing improvement in China's business climate, according to business leaders and experts.

The Cabinet adopted a raft of measures at its executive meeting on Wednesday to standardize charges levied on businesses, highlighting the need for measures to support market players, especially small and medium-sized enterprises, to place the economic recovery on a more stable footing.

Key steps include nationwide inspections of unwarranted charges on enterprises－including those levied by industry associations－and better regulation of law enforcement in transportation, taxation and emergency services.

In the transportation area, minor violations and first-time and occasional road traffic offenders will in most instances be issued with a warning rather than a fine. In the taxation sector, a list-based mechanism will be promoted under which first violations won't be punished.

Ma Liang, a professor of public administration at Renmin University of China, said the fallout from the pandemic and the global economic downturn has harmed SMEs, and it is important to standardize and cut business charges to prevent unreasonable fees exacerbating their plight.

"The rectification of law enforcement on first or minor offenses will enable businesses to better cooperate with government oversight and reduce their burden," he said.

Standardizing business-related charges will prevent local authorities from levying arbitrary fees or excessive fines, he said.

"A standardized system on corporate fees is an important indicator of a law-based business environment, which can also reduce interruptions to the operations of enterprises from frequent law enforcement," he said.

China is one of the most improved nations in terms of its business environment, according to surveys conducted by the World Bank in 2018 and 2019. The country jumped from a global ranking of 78 to 31 in terms of ease of doing business over the period.

The central government rolled out a variety of aid packages for businesses last year, including tax and fee cuts that totaled 2.5 trillion yuan ($386 billion), to cushion them against the impact of the pandemic.

The country also established a mechanism that channels fiscal funds directly to county or city-level governments for the purposes of tax cuts and encouraging consumer spending.

The meeting on Wednesday pledged to continue revamping charges and oversight in key areas, such as government-managed funds and fees levied at seaports.

It also warned local authorities not to demand businesses pay off arrears of social security contributions in a lump sum. The government will continue refining procedures on the collection of social security contributions to ensure that businesses can pay their fees online before the end of July and individuals can pay their dues by year's end, the Cabinet said.

Zhang Tao, the CEO of business-to-business platform Yeebee, said the move by the State Council to promote online services on social security contributions will save time and cut human capital costs for businesses, especially SMEs.

Online services will be welcomed by businesses, especially given travel restrictions due to COVID-19, he noted.

"With many SMEs now struggling, it is even more important to create an enabling policy environment to stabilize the job market and spur social creativity," he said, adding that ensuring the full implementation of the latest measures would be crucial.

Zhao Jinxin, a researcher on the macro economy with China Minsheng Bank's think tank, said with COVID-19 recurring in some areas in China and SMEs facing difficulties in their operations, the arbitrary fees levied by authorities remain one of the largest obstacles to businesses to reopen and scale up investment.

The latest move, which comes on the heels of previous measures to curb unreasonable corporate fees, "will help maintain the consistency of macro policies and better the business environment, which can also help stabilize market expectations, stimulate the vitality of businesses and shore up the confidence of entrepreneurs", he said.

Zhao added that the government's decision to avoid collecting arrears in a lump sum will offer a shield to SMEs－the most vulnerable of all stakeholders－and substantially reduce their burdens.