Measures to assist SMEs with payrolls, digital transformation

China has rolled out a raft of fiscal measures to support small and medium-sized enterprises, pledging to help smaller companies stabilize their payrolls and undergo digital transformation.

In a statement released on Aug 20, the Ministry of Finance vowed to better aid SMEs in government procurement procedures, saying the policy that reserves at least 40 percent of procurement contracts for such companies will be extended to the end of 2025.

To help SMEs stabilize their payrolls, the ministry highlighted the need to continue offering one-time subsidies to smaller businesses that recruit new college graduates, graduates who fail to find jobs within two years of their graduation or young unemployed people.

The measures follow the central government's release of a host of measures in recent months to sustain the momentum of the economic recovery and help businesses.

According to the National Bureau of Statistics, China's official manufacturing purchasing managers' index rose to 49.3 last month from 49.0 in June.

A reading above 50 indicates an expansion in activity, while a reading below it indicates a contraction.

According to the NBS, the PMI subindex for small businesses was 47.4 last month, up from 46.1 in June, while the reading for medium-sized businesses was 49 last month.

According to the Ministry of Industry and Information Technology, the number of SMEs exceeded 52 million by the end of 2022, and they contributed to over half the nation's tax revenue, over 60 percent of the national GDP and over 80 percent of urban employment.

Meanwhile, the Ministry of Finance said it will select some cities to conduct pilot projects to help foster the digital transformation of SMEs, and will offer fixed subsidies to participating companies.

The national development fund for SMEs will continue to support the growth of smaller companies in their startup periods, the ministry said.

Liang Si, a researcher at the Bank of China's research institute, said the healthy operations of SMEs have been crucial to China's economic performance, and beefing up support for them is key to the nation's efforts to sustain the momentum of its economic recovery.

The latest measures will help SMEs by reducing their operating costs, enabling easier access to financing and boosting their role in the market, Liang said.

"This comprehensive approach is expected to provide effective support for SMEs, enabling them to play a significant role in stabilizing growth and employment," he said.