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In China’s battle against the coronavirus epidemic, the nation is striving to contain the spread of the virus. Many provincial and municipal governments across China have issued first-level emergency responses to enable emergency measures in combating the epidemic. For enterprises across China, such measures are directly impacting on businesses, resulting in economic consequences.
To address the economic impact of the coronavirus, the Communist Party Central Committee and the State Council, under the leadership of President Xi Jinping, have called on all Party committees and governments at all levels to minimise the impact of the epidemic in order to maintain steady economic performance as well as social harmony and stability. In response, many provincial and municipal governments have enacted measures to support business and reduce the burdens caused by the epidemic.
On the morning of the 8 February, the Municipal Epidemic Prevention and Control Work Leading Group held a press conference in Shanghai where they issued 28 comprehensive policy measures (“Measures”). The Measures are put forth to fully support enterprises in fighting the coronavirus epidemic and effectively reducing the burden on businesses. In this article, we offer some key takeaways regarding the Measures.
Many are asking if the governmental measures related to fighting the coronavirus will affect foreign investment in China? As a starting point to answer this question, we note that from January of this year, under Foreign Investment Law of the People’s Republic of China, Article 9, “The policies of the state supporting the development of enterprises shall equally apply to foreign-invested enterprises in accordance with the law.” In a word, foreign companies established in Shanghai come under the same rules and regulations as domestic entities. That said, we summarise the key effect of the “Measures”.
Increased financial and taxation support for key enterprises in epidemic prevention
For key enterprises involved directly in the epidemic prevention, any increased production capacity and purchases in equipment can enjoy preferential tax treatment related to value-added tax, income tax and registration fees. Equally, financial credit support and channels shall be strengthened for key enterprises with discounted loan rates.
Reduced and exempted corporate rental fees
Small and medium enterprises renting and engaged in production and operation activities within the state-owned real estate sector will be exempted from February and March rental fees. State-owned real estate includes various development zones and industrial parks, entrepreneurial bases and technology incubators. Large-scale commercial buildings, shopping centres and other private commercial real estate are encouraged to reduce rental fees. Enterprises taking initiative to reduce or exempt housing rent or land rent, and face difficulties in payment related to real estate tax and urban land use tax may apply for reduction or exemption of such taxes.
Deferred tax declaration
During the epidemic prevention and control period, affected taxpayers experiencing difficulties in reporting taxes within the provisioned time period may apply for a time extension. For those who meet the conditions for deferred tax payment, the maximum tax period is three months. Any taxpayers who are unable to report and pay tax due to the impact of the epidemic may be exempted from late fees and administrative penalties.
Increased financial assistance to enterprises
The Measures provides funding support for enterprises through multiple channels. Specifically, Pudong Development Bank, Shanghai Bank and Shanghai Rural Commercial Bank are encouraged to increase credit allocations in an effort to fight the epidemic by supporting enterprises affected by the epidemic, including small, medium and micro-enterprises.
Support for enterprises to stabilise employment
In order for employers to retain employees, 50% of unemployment insurance premiums paid in the previous year shall be returned to employers and their employees under the condition that the employers do not reduce the number of their employees and meet related requirements. Equally, the adjustment for society security contributions base will be delayed by three months and the starting and ending dates of the social insurance payment for 2020 shall be adjusted from 1 July 2020 to 30 June 2021.
Subsidised training fees
Regarding vocational training for employees organised by enterprises during the suspension period, 95% of such training cost shall be subsidised by the district of the enterprise.
Beyond the latter, local governments across China will enact similar macro policy regulation to support business and minimise the economic impact of the coronavirus. Moving forward, we expect further fiscal, tax, financial and social security policies for providing relief for small and medium-sized enterprises.
Overall, forecasts from analysts indicate the impact of the epidemic on the Chinese economy is short term. Global investors either already invested or planning to invest in China are encouraged to look beyond short-term fluctuations. Rather, China’s long-term growth prospects indicate satisfactory returns. Compared with the 2002 SARS outbreak, China’s current economy is more developed. Supporting policies and improved credit conditions aim to provide an “economic immune system”.
Photo: Nicole Chan
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