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Business / Economy

China big on SMEs amid economic slowdown

(Xinhua) Updated: 2014-05-28 10:52

BEIJING - Chinese officials said on Tuesday that more efforts by the government are under way to revitalize the country's small and medium-sized enterprises (SMEs) in boosting economic growth.

SMEs, which create more than 60 percent of economic output and more than 80 percent of urban jobs in the country, are the most numerous and innovative of the country's enterprises.

"They are irreplaceable in boosting economic growth, pushing forward innovation, and providing employment," said Zheng Xin, director of the SMEs department under the Ministry of Industry and Information of Technology (MIIT).

The central government will budget 11.5 billion yuan ($1.86 billion) in a special fund for SMEs to support their innovation and international cooperation. The money will also be used to provide financial assistance to some SMEs, according to Xu Kemin, deputy director of the MIIT SMEs department.

The State Council, China's cabinet, said last month that tax breaks for small and micro firms will be extended until the end of 2016, with companies eligible to have their business income tax halved if their taxable income is under 100,000 yuan per year.

The central government has acted toward tax reduction for SMEs in recent years. Through the expansion of value-added tax, which has replaced turnover tax in some sectors, taxes worth 120 billion yuan were exempted for corporate firms last year, with SMEs the major beneficiaries, Xu said.

Xu added that unreasonable administrative charges by government agencies on companies are also gradually being scrapped, with their value estimated to have totaled 30 billion yuan since 2012 and unfair charges will continue to be cleared.

The efforts to boost SME growth came as economic growth in the world's second-largest economy slowed to a six-quarter low of 7.4 percent in the first quarter of the year.

Zheng said that Chinese SMEs are generally stable and healthy, though challenges such as rapidly increasing costs in labor, logistics, and rental fees are squeezing out their profits.

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