Small, but quite essential

In the Government Work Report delivered to the fifth plenary session of the 12th National People’s Congress on Sunday, Premier Li Keqiang promised further tax cuts for small and micro-sized enterprises, among other preferential policies and measures. This signals more support for the development of the large number of small and micro-sized enterprises in the country, which is the manifestation of the leadership’s “mass entrepreneurship and innovation” campaign.

China now has 60 million small and micro-sized enterprises, more than 99 percent of its total number of companies. And, according to official statistics, such enterprises create about 60 percent of China’s gross domestic product, contribute 50 percent of its tax revenues, provide more than 75 percent of urban jobs and create over 60 percent of the country’s export volume.

At the same time, 65 percent of the country’s patents, 75 percent of its technological innovations and 80 percent of its new products are registered by small, medium- and micro-sized enterprises.

Yet, despite their recent booming development, it is a brutal fact that many small enterprises are now struggling because of the difficult economic climate. By reducing their tax burden, the government is extending a helping hand to small and micro-sized enterprises.

Tax cuts are the most effective way the government can find to support small businesses, given that most of them are plagued by rising costs and insufficient funding. In the context of the country’s economic downturn, further tax cuts may put additional pressure on the government’s fiscal revenues, but the rejuvenation of these enterprises will give more vitality to the economy.