Vigor of small businesses

Monday's guideline on extending financial support to small and micro-sized enterprises marks a new move to create a more favorable environment for China's struggling small businesses.

According to the guideline issued by the State Council, the growth rate for credit channeled to small enterprises should not be less than total growth for credit and the increase in credit should not be less than the previous year's.

At the same time, financial institutions are required to raise the share of newly increased loans to small enterprises and make innovations in the financial services they provide to small companies.

The government will also support the establishment of more village banks and credit companies in areas where smaller firms are concentrated, according to the guideline.

A study for the Boao Forum for Asia in April found that new and small businesses on the mainland were being hard hit by the slowing economy and rising costs.

Nearly one-third of 1,000 companies surveyed said their profits had fallen last year, while 27 percent said their profits had remained the same. And there have been reports that a large number of small enterprises in China's coastal areas have been forced to close due to difficulties in obtaining credit from the banks, which prefer lending to State-owned companies.

The new measures will be of substantial help to those small businesses that have been looking for financing to invest or move into new markets, but which have found it difficult to get credit from the banks.

The new guidelines come less than a month after the State Council announced that small businesses with a monthly revenue of less than 20,000 yuan ($3,260) would be exempt from value-added and business taxes from Aug 1.

Helping to maintain the vigor of the country's micro, small and medium-sized businesses is essential, given they contribute 60 percent to the nation's gross domestic product and account for 80 percent of the jobs.

The additional support being offered should provide a significant shot in the arm for the private sector and help ease the downward pressure on the economy.

As China's economy decelerated to 7.5 percent in the second quarter, such practical measures to guarantee the dynamism of small businesses are welcome.

(China Daily 08/14/2013 page8)