The central treasury is implementing six measures this year to help small- and medium- sized enterprises (SMEs) meet the challenges they face, according to the Ministry of Finance.

The ministry will earmark 3.51 billion yuan (US$514 million) worth of special funds to help the growth of SMEs, it announced earlier this month. The measures include:

Guiding SMEs to adjust their growth model. SMEs have been encouraged to adjust their corporate structure, save energy, cut emissions and further explore the domestic and overseas markets. The public service system for SMEs has also received a boost.

The fund valued at 500 million yuan dedicated to the development of SMEs this year has been allocated, up 25 percent from last year. About 1.2 billion yuan, or 20 percent more than last year, has been set aside for exploring the international market. The subsidy for improving the public service system for SMEs, summed at 110 million yuan, has been prepared.

Supporting SMEs in starting business and in technological innovation. A technological innovation fund, valued at 1.4 billion yuan, has been earmarked, representing 27 percent growth from last year. An additional 300 million yuan has been directed to commercializing agricultural technological results.

Building the credit guarantee system and improving the financing environment for SMEs. The central treasury has granted greater support to credit guarantee institutions and guided them to actively serve SMEs.

Implementing tax incentives. Starting this year, the corporate income tax became standard at 25 percent for both domestic and foreign enterprises. For some small or marginally profitable enterprises that meet certain criteria the rate is reduced to 20 percent. For some hi-tech companies, the rate is 15 percent.

To help textile and garment enterprises, many of which are SMEs, cope with their difficulties, the export duty rebate rate on textile and garment products was increased from 11 percent to 13 percent in August, which result in a half-year total rebate of 10 billion yuan.

The Ministry of Finance will formulate regulations for government procurement targeting SMEs. Governments at various levels will be encouraged to procure from SMEs.

Sorting out administrative charges and eliminating irrational charges to lessen the burden on SMEs. A decision was adopted on September 1 to stop collecting industry and commerce administration fees and market administration charges, which mostly benefits SMEs.

The country has about 40 million SMEs, including those run by individuals. They have become the economy's most dynamic factor, accounting for about three-fourths of the urban employment.

Yet many labor-intensive SMEs have encountered difficulties this year as a result of slower export growth amid global economic doldrums, rising labor costs, an appreciating Chinese currency and increasingly expensive raw materials.

Experts said the measures are meant to improve the climate for the development of SMEs and to guide them on the path of industrial improvement and technological innovation to realize sustainable development.

Zhang Yansheng, director of International Economic Research Institute of National Development and Reform Commission, said China is at the stage of restructuring its comparative advantages. Against the background of an appreciating yuan, higher costs of labor and production materials have become inevitable.

The only way out for SMEs, he said, is to adjust and make products with higher technology and value.

(China Daily September 22, 2008)