The Ministry of Finance announced on Wednesday, February the 4^th 2021, that the Central Government will provide financing support to more than 1,000 innovative small and medium enterprises (SMEs) from 2021 to 2025. The Government will allocate more than RMB 10 billion (USD 1.5 billion) to further drive the development of the country’s industrial economy. These progressive and innovative SMEs are expected to function as a stabilizing force of the country’s supply chain and will allow China to pursue further development in the manufacturing processes.

There is a widespread opinion among the policymakers that by providing fiscal incentives to certain SMEs, which specialize in only a few products and are the leaders of their respective industries, these companies can help the nation to achieve its objectives and reach new breakthroughs in the respective areas. Furthermore, the financing can also help to attract the attention of the local governments to provide fiscal support for those innovative businesses. The financing of the competitive SMEs is especially important as in China SMEs account for 60% of the country’s GDP, roughly half of the country’s tax revenue, and approximately 80% of the urban employment.

China in recent years has rolled out a number of policies to support the development of domestic SMEs. For instance, to support the businesses amidst the COVID-19 pandemic, the authorities have introduced many preferential policies, including tax rebates to assist SMEs in their day-to-day operations and sustain the urban employment levels. In 2020, China SME Development Fund Co. Ltd., a fund with a registered capital of RMB 35.75 billion, was registered in Shanghai. Its main objective is to promote the sustainable growth of SMEs in key sectors, with the Ministry of Finance acting as a limited partner with a 42.66 % stake worth RMB 15.25 billion.

Many business executives of the innovative SMEs have already expressed their deepest interest in relation to the financing measures proposed by the govermnet, which will help them with their long-term growth goals. At PHC Advisory our team is constantly monitoring the most recent developments and incentives accessible to businesses in China. Feel free to reach us at info@phcadvisory.com to find out more about preferential policies in China that your company could benefit from.