China’s Employment: New Supporting Policies for Enterprises

On September 7th, the State Council executive meeting was held to deploy policies to strengthen support for employment and entrepreneurship. It was decided that periodic financial discounts on loans for equipment renovation shall be provided in some fields and an increase in credit support for social service industries should be contributed so as to promote consumption and play a leading role in driving consumption. Tax reduction policies to support enterprise innovation, and encourage enterprises to increase investment to enhance innovation capabilities were also deployed. Among them, the following policies were introduced:

1. Unemployment insurance balance required shall be reduced from 24 months to 18 months where work-stay training subsidies are implemented. This includes college graduates and registered unemployed youths who have not been employed within two years into the job expansion subsidy.

2. Start-up guaranteed lenders who are in distress due to the pandemic can extend the repayments for one year. Banks shall increase initial loans, credit loans, renewal loans, and medium and long-term loans for small and medium-sized enterprises.

3. Insurance funds are encouraged to invest in venture capital funds in accordance with the law and optimize the lock-up period for the shareholders of venture capital enterprises in order to facilitate the reinvestment of recovered funds.

4. The government-invested business incubation bases and venues shall do its best to provide space for free start-ups.

It is suggested, in order to support the upgrading of equipment in areas with weak economic and social development, to increase the actual demand of the manufacturing and service industries, and boost market confidence.

Phased incentive policies are to be implemented for colleges and universities, vocational colleges and training bases, hospitals, new infrastructure, industrial digital transformation, and new loans for the purchase and renovation of equipment for companies such as SMEs, and individual industrial and commercial households are to be provided. A fiscal discount rate of 2.5 percentage points for a period of 2 years is suggested. The application for discounted interest shall be open until December 31st of this year.

Correspondingly, monetary policy support for supporting the financing of commercial banks shall be increased. At the same time, banks shall be guided to increase credit support for industries such as education, cultural tourism, health and fitness, nursing care for the elderly, community and housekeeping services, accommodation and catering, so as to expand consumption and investment in social services.

As for a phased tax reduction policy to support corporate innovation, the deadline shall be December 31st of this year. The relevant provisions include:

1. For the expenditure on equipment purchased by high-tech enterprises in the fourth quarter of this year, a one-time deduction of the full amount before tax and a 100% additional deduction for the current year are allowed, as well as further fiscal support.

2. In the fourth quarter of this year, for industries that currently deduct R&D expenses at a pre-tax rate of 75%, the deduction rate will be uniformly increased to 100%, and the transformation and renewal of equipment will be encouraged.

3. For basic research expenditures such as scientific research institutions funded by enterprises, the full amount of pre-tax deductions and additional deductions are allowed.

At PHC Advisory our team is constantly monitoring the most recent developments and incentives accessible to businesses in China. Feel free to reach us at info@phcadvisory.com to find out more about preferential policies in China that your company could benefit from.