New tax cuts nurture small business growth

China had previously raised the tax threshold for small business owners, but the country still lacks tax incentives for promising start-ups.

"Small businesses add vitality to the market, but without sufficient policy support, they could be weighed down by a cash squeeze that eventually threatens their very survival," said Liu Gang, vice dean of the Binhai Development Institute of Nankai University in Tianjin.

Liu added that the tax cuts could be the first step toward a broader set of policies to nurse the growth of start-ups and small businesses.

The country's thriving micro and small enterprises will greatly boost growth and economic restructuring, Premier Li Keqiang said at a workshop in early July in south China's Guangxi Zhuang Autonomous Region.

However, many business owners currently benefitting from the tax cuts have expressed concerns that if their businesses expand, they may have to shoulder a monthly tax burden of at least 1,500 yuan once their monthly revenue tops 20,000 yuan.

To address such concerns, Yang Zhiyong, a researcher with the National Academy of Economic Strategy at the Chinese Academy of Social Sciences, suggested that going forward, the policy could be revised to only tax the amount exceeding the 20,000 yuan threshold.

Such a change could extend the tax relief through continuous business expansion without hitting small companies with a sudden shift to heavy taxes, Yang added.

"From a long-term perspective, policymakers should build up a comprehensive policy package to aid the growth of micro and small enterprises," Yang said.