Employees of an auto parts company work at a workshop in Anting Town of Jiading District, east China's Shanghai, March 26, 2022. Photo:Xinhua

 
Chinese officials vowed on Wednesday to remove the “stuck points” in implementing policies aimed at easing the burden for small and medium-size enterprises (SMEs), as well as stressing a number of key missions for supporting the companies, such as increasing capital support and pushing for expansion of market demand. 

It marks another signal sent by officials recently that the Chinese government will stand by small enterprises amid the coronavirus battle. Experts said it could help stabilize market expectations and dispel uncertainty. 

Xu Xiaolan, deputy head of the Ministry of Industry and Information Technology (MIIT), on Wednesday cited economic data from the National Bureau of Statistics (NBS) as showing that China’s SMEs had a stable start to the year, and that their resilience and vitality have not changed. 

Small and medium-size industrial enterprises saw their revenues and profits surge by 14.1 percent and 6.5 percent year-on-year in the first quarter, the NBS data showed. 

But Xu also acknowledged that many SMEs in China have been having operational difficulties, as the recent wave of the coronavirus has had a heavy impact. Problems reported by the firms include difficulty to get orders, blocked logistics and financing difficulties. 

Wu Qi, deputy director of the Wuxi Digital Economy Research Institute, said on Wednesday that SMEs face problems such as high raw material costs, high rent and high labor costs. Their business also deteriorated further during the COVID outbreak. 

“In my observation, SMEs don’t feel the effects of difficulty-relieving policies very strongly. Their biggest problems are a decrease in income and financing difficulties,” he told the Global Times. 

To deal with this situation, officials again emphasized the methods that China would take to help relieve the burden for SMEs. Xu said that the MIIT would press local governments and relevant departments to shoulder their responsibilities and solve the “stuck points” in policy implementation, as the government strives to help small companies enjoy the benefits of the relevant policies. 

The government will also increase capital support and relieve financing difficulties for small companies. 

According to Wu, financing difficulty is a “chronic problem” for small companies, as they lack the financial strength and eligible collateral that large companies have. 

“From the perspective of banks, companies with positive business operation start to diminish their business expansion, which reduces their need to borrow money. Companies with weak operation have the need, but banks don’t dare to lend them money,” Wu said. 

Hu Qimu, chief research fellow at the Sinosteel Economic Research Institute, told the Global Times on Wednesday that one important mission for the government is to bolster market expectations and enhance people’s confidence, as the problem of weak demand is growing. This will make companies reluctant to make investments, even if the banks are willing to provide capital support. 

Hu suggested support policies like interest rate cuts and consumption stimulus. “When business costs are lowered to a certain extent, people would dive in,” he said. 

Another point is that officials need to dispel market uncertainty about policy direction, he said. For example, the Shanghai municipal government repeatedly sent signals about work resumption recently, which would enhance companies’ confidence in business prospects, Hu noted. 

Wu said that the government could solve financing difficulties from both the demand and supply sides. For example, preferential policies should be rolled out in areas like bad loan rates and liquidity to enhance financial institutions’ willingness and capability in offering loans. 

On the demand side, incremental policy tools can be used, such as further enhancing the flexibility of financial policies, as well as increasing capital support for companies’ digital transformation. 

Officials also detailed other methods to help small companies, including pushing for lower costs and expanding market demand.