Россия и ВТО: присоединение и его последствия / Текущая аналитика / Abstract by Yudina Alyona on the article of Arendse Huld «New Relief Measures for Service Industry and Small Businesses in China in 2022»

Abstract by Yudina Alyona on the article of Arendse Huld «New Relief Measures for Service Industry and Small Businesses in China in 2022»

The article “New Relief Measures for Service Industry and Small Businesses in China in 2022” written by Arendse Huld was posted on February 28, 2022. Arendse Huld is an Editor for China Briefing, based in Shanghai, China. She writes on policy and the regulatory environment, particularly as it pertains to technology, business, and foreign investment in China.

The author metioned that The National Development Research Council (NDRC) has released a policy list aimed at providing fiscal and logistical support to service industry businesses affected by the COVID-19 pandemic, particularly catering, retail, and travel. The list includes tax reductions, exemptions, fiscal support measures, and assistance in implementing COVID-10 prevention measures. Both MSMEs and China's growing service industry are crucial to the country's economic stability and future growth prospects. The services sector, which surpassed 50% of GDP in 2017, is seen as a key driver for future growth as China moves away from its reliance on manufacturing. However, these industries have been particularly vulnerable to market volatility and crises, particularly during the pandemic. A Deloitte report revealed that 69% of catering businesses experienced an 80% decrease in dine-in customers during the pandemic, with 32% believing takeout orders had decreased by 80%.

The COVID-19 pandemic has significantly impacted travel and tourism in China, with 251 million trips during the 2022 Chinese New Year, a 2% decrease from 2020. International travel has been almost halted due to the rise in imported COVID-19 cases, with Chinese airlines reporting losses in 2021. Post-pandemic recovery has been challenging, with strict COVID-19 prevention measures impacting businesses and reducing consumer confidence. China has implemented measures to support small businesses in catering, retail, and travel industries, including tax reductions and directives to tech platforms to reduce merchant fees. These measures aim to help small-scale businesses cope with the increased tax burden and support from the government.

The tax benefit for small-scale VAT taxpayers has been extended to 2022, encompassing eligible small low-profit enterprises and individual industrial and commercial merchants in the services industry. The policy includes tax reductions, inclusive insurance policies, rent reductions for MSMEs and individual industrial and commercial merchants in high-risk COVID-19 areas, and guidance for banks to allocate RMB 2.2 trillion (US$348.8 billion) of funds released by the two reductions in the required reserve ratio (RRR) in 2021. Incentives for 1% of the incremental balance of inclusive small and microloans will be provided to local corporate banks, and financial institutions will be encouraged to increase financial support for industries in difficult positions, especially the service industry. Lowering the loan prime rate and re-lending interest rate will support agriculture and small businesses.

The policy list aims to mitigate the impact of COVID-19 restrictions on catering, retail, and travel businesses. It encourages free and periodic COVID-19 testing for employees and provides subsidies for epidemic prevention and sterilization expenditures. Provinces with large cash surpluses in unemployment insurance and work-related injury insurance funds can implement phased payment deferrals for these enterprises. Government financing guarantee agencies are encouraged to provide financing and credit enhancement support for eligible MSMEs. The list also supports qualified localities in injecting capital into government financing guarantee agencies and providing financing guarantee fee subsidies. The list also focuses on catering businesses, guiding internet platforms to lower service fees, encouraging insurance institutions to optimize products and services, expanding business interruption insurance coverage, and providing premium subsidies.

The COVID-19 pandemic has led to a series of relief measures for various sectors, including catering, tourism, transport, and transport businesses. Catering businesses are advised to lower service fees, optimize products and services, and expand business interruption insurance coverage. Tourism businesses are encouraged to increase credit supply, reduce interest rates, issue corporate credit bonds, and provide small loans to individual merchants. Transport businesses can enjoy tax benefits and support measures, including VAT exemptions, central government subsidies, coordination of central-to-local transfer payments, and subsidies for qualified air routes and security capabilities. The policy list also aims to curb the arbitrary implementation of strict COVID-19 prevention measures by local governments, prohibiting lockdowns and travel restrictions without central government approval. The list also outlines several "must nots" for local authorities, including not preventing people from low-risk areas from returning to their hometowns, expanding the scope of medium and high-risk areas, and subjecting people to measures such as centralized quarantine without authorization.

China is focusing on supporting small and medium-sized enterprises (SMEs) in the service industry due to the impact of COVID-19 on their economic stability. The People's Bank of China (PBOC) has reversed a decision banning personal mobile barcodes for business owners, allowing them to use their own or apply for a new merchant's barcode. The government is also aiming to cultivate new startups, particularly in technology and telecommunications, as MSMEs are key drivers of innovation and patent filings.

The advantages of the article on new relief measures for small businesses in China's service sector include:

1. Support for Small Businesses: The relief measures offer tax exemptions and monetary support from financial institutions, providing much-needed assistance to small businesses in the service industry.

2. Targeted Relief: The policies target industries severely impacted by the COVID-19 pandemic, such as catering, retail, and travel, addressing specific challenges faced by these sectors.

3. Economic Growth: By supporting small businesses, which are essential to China's economy, the measures aim to promote the long-term health and development of these businesses, contributing to overall economic growth.

The disadvantages of the article may include:

1. Lack of Specific Details: The article does not provide specific information on the extent of tax exemptions or the nature of monetary support offered, which may limit a comprehensive understanding of the relief measures.

2. Implementation Challenges: While the relief measures are beneficial in theory, challenges may arise in the effective implementation of these policies, their impact on small businesses.

3. Dependency on Government Support: Small businesses relying heavily on government relief measures may face challenges in achieving sustainable growth without long-term strategies in place.

Overall, the article highlights positive steps taken to support small businesses in China's service sector, but potential challenges in implementation and sustainability should be considered.

To my mind this theme is actual, because the small business support is an essential part of Chinese Economy as well as Russian. Moreover, it is necessary to explore the impact of small-business support on the Economy. However, the article is written in 2022 and there are some updates in Chinese Economy regarding this field.

In my opinion, the possible refreshments and extensions of the article could include:

  1. Comparison with similar relief measures implemented in other countries to provide a broader perspective;
  2. Interviews with small business owners or industry experts to gather insights on the challenges and opportunities arising from the relief measures;
  3. Future projections and recommendations for policymakers to further support small businesses in the service sector.

Resource: Arendse Huld «New Relief Measures for Service Industry and Small Businesses in China in 2022» China Briefing: 2022 https://www.china-briefing.com/news/small-businesses-in-china-new-relief-measures-for-service-sector/

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