Legally Promote Sound Development of Small and Mid-sized Enterprises

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Last updated at: (Beijing Time) Tuesday, July 30, 2002

Legally Promote Sound Development of Small and Mid-sized Enterprises

The Law of the People's Republic of China on Promotion of Small and Medium-sized Enterprises (SMEs), examined and approved by the 28th Session of the Ninth NPC Standing Committee. Following is the full text of the article written by Minister Li Rongrong with the State Economic and Trade Commission, which was published on Page 5 of People's Daily, July 29.

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The Law of the People's Republic of China on Promotion of Small and Medium-sized Enterprises (SMEs), examined and approved by the 28th Session of the Ninth NPC Standing Committee.

This is China's first special law on small and medium-sized enterprises, which marks the fact that the development of China's small and mid-sized enterprises has embarked on the track of standardization and legalization, it will play a tremendous promotional role in the establishment and development of China's small and mid-sized enterprises of different forms of ownership.

At present, the number of China's small and mid-sized enterprises registered with the industrial and commercial administration has exceeded 8 million, accounting for 99 percent of the country's total registered businesses, with their gross industrial output value, sales income, taxes and profits, and gross export volume representing around 60 percent, 57 percent, 40 percent and 60 percent respectively of the national total; small and mid-sized enterprises in the field of circulation are well over 90 percent of the country's retail outlets. Small and mid-sized enterprises have also provided around 75 percent job opportunities for cities and towns, making important contributions in absorbing job seekers.

Along with the quickening pace of the structural adjustment of State-owned enterprises in the past few years, small and mid-sized enterprises have played an increasingly important role in guaranteeing the steady growth of the national economy, easing employment pressure, boosting non-governmental investment, optimizing the economic structure, stimulating market competition, impelling technological innovation, bringing about market prosperity, providing conveniences for people's lives and maintaining social stability.

For a long time in the past, however, due to the lack of special legal guarantee and support, small and mid-sized enterprises have also met with many obstacles and problems. These are manifested mainly in fund-raising difficulty, backwardness of technology and equipment, impeded flow of information and the lack of sufficient talents. Along with China's accession to the WTO, small and mid-sized enterprises will face even more intense market competition. These problems have held up the sound development of these enterprises and prevented them from fully tapping their potentials. The sharpening contradiction of employment has set pressing demands on the government for promoting the development of small and mid-sized enterprises.

It was against this background that the Law on the Promotion of Small and Medium-sized Enterprises was published. Taking "improvement of the business environment for small and mid-sized enterprises, promotion of their healthy development, expansion of urban and rural employment, full play to the important role of these enterprises in national economic and social development as its legislative purpose, the said Law has established the legal position of small and mid-sized enterprises in the national economy, clearly defined the responsibilities of government administrative departments and elevated the main policies on supporting and promoting the development of such enterprises to a legal height.

The Law on the Promotion of Small and Medium-sized Enterprises will become effective as of January 1, 2003. We should regard proper study and implementation of the said Law as concrete actions in applying the important thinking enshrined in the "three represents", we should effectively implement the said Law, earnestly strengthen and improve work related to these enterprises, actively support and promote their development, safeguard their rights and interests and create a favorable external environment for their development. Enforcement of the Law is an arduous and complicated work, it requires careful organization and successful preparatory work for its implementation, so as to guarantee its smooth implementation.

Conscientiously Study and Publicize this Law, Have a Profound Grasp of Its Essence and Main Contents.

Studying, publicizing and popularizing the knowledge about the Law is an important link in implementing this Law, to which attention should be paid by various localities and departments concerned.

At present, these localities and departments should, from the high plane of stressing political awareness, maintaining stability and promoting development, conscientiously study the Law, have a profound grasp of its essence, enhance their understanding of the important significance of the Law in advancing the sound development of small and mid-sized enterprises, so as to create an atmosphere in which the whole society is concerned with the small and mid-sized enterprises.

Efforts should be made to enable governments at all levels, enterprises of various types as well as other social members to have a correct understanding and grasp of the basic stipulations of the Law on the Promotion of Small and Medium-sized Enterprises, so that government organizations can exercise administration according to law, create and improve the environment favorable to the healthy development of these enterprises; that these enterprises can consciously safeguard their lawful rights and interests, do their businesses according to law; and that finance, consultation, investment, training and other service agencies establish the consciousness of serving these enterprises.

The departments concerned should, in light of the responsibilities entrusted to them by the law, adopt various forms to actively publicize the significance and role of this Law, so that the numerous small and mid-sized enterprises and various social circles can quickly become familiar with the understand this Law, strengthen their conception of the legal system, enhance their legal awareness and ensure that they study, understand, and observe the Law consciously, do administration and promote the sound development of small and mid-sized enterprises according to law.

Step Up the Study and Formulation of Supplementary Regulations, Policies and Other Documents to the Said Law.

This Law stipulates, in legal form, the rights and interests of small and mid-sized enterprises and the State's institutional measures for supporting the development of such enterprises, lays a legal foundation for comprehensively advancing the development of these enterprises, but many problems involved wait to be further concretized and standardized, such as the standard for small and mid-sized enterprises, the establishment of a development fund for these enterprises, the method for the use and management of the fund, the method for these enterprises' credit guarantee and management and preferential taxation method for specially designated small and mid-sized enterprises. These regulations and policies are crucial for implementation of the said Law.

Such being the case, on the basis of the said Law, we should quickly formulate supplementary regulations and policies, put into practice the various legal systems as stipulated in this Law, so as to establish a scientific, perfect and orderly system for the legislation related to China's small and medium-sized enterprises.

At the same time, we should step up efforts to sort out, abolish and revise regulations, rules and normative documents that are conflicting with the said Law, economic and trade commissions at all levels should, in the process of studying, publicizing and implementing the said Law, timely sum up practical experiences, advance effective legislative proposals and do effective work in drafting supplementary regulations and policies together with relevant departments of the State Council.

Make Active Efforts to Do Well the Work of Supporting, Guiding and Serving Small and Medium Enterprises.

In light of common international practices and useful experiences, the said Law has, in financial support, propping up start-ups, technological innovation, market diversification and social service, laid down explicit stipulations, thus legally and effectively solving the outstanding problems facing the development of such enterprises.

For this, the State Economic and Trade Commission should, together with relevant departments of the State Council and in line with the State principles of actively supporting, strengthening guidance to and improving service for small and medium enterprises, and standardizing and guaranteeing the rights and interests of these enterprises according to law, actively do well the work of supporting, guiding and serving these enterprises and strive to create a favorable environment for the establishment and development of these enterprises.

First, in accordance with the stipulations of the said Law, it is necessary to actively solve the source of fund for the development of these enterprises, set up items related to these enterprises in the central financial budget, arrange special funds for the development of these enterprises, set up development fund for them and give priority support to the founding of these enterprises, credit guarantee, technological innovation, specialized cooperation and development as well as construction of a service system.

Second, it is necessary to effectively solve the problem of fund-raising difficulties plaguing small and medium enterprises, strengthen credit policy guidance, improve financial service, readjust the credit structure and adopt various forms to provide financial services for these enterprises.

Third, it is necessary to further push forward the construction of a credit system for these enterprises, promote and organize the establishment of a credit security system for these enterprises and, in light of the experiences gained by some provinces and cities in experimenting with a socialized credit system for small and medium enterprises, study and formulate implementing opinions on promoting the construction of a credit system and credit set-up for these enterprises,.

Fourth, in accordance with the stipulations of the said Law, it is necessary to establish and perfect the preferential taxation policy and financial support policy that encourage pioneering work and support technological innovation and market diversification. And

Fifth, it is necessary to continue promoting the establishment of socialized service system for small and medium enterprises and encourage various types of intermediary service organizations in society to provide such enterprises with start-up guidance, enterprise diagnosis, marketplace sales, investment and fund-raising, security of loan, transaction of property rights, technical support, personnel training, foreign cooperation, sales exhibition, legal consultation and other services.

On the basis of summing up the work of pilot cities experimenting with the establishment of a guidance service system and in light of legal stipulations, it is necessary to study and put forward policies for promoting the normal development of various types of service agencies. Government departments should earnestly change their styles and conceptions of work, change their functions, improve work efficiency, firmly establish the consciousness of serving small and mid-sized enterprises and guide these enterprises to legally set up the management of fund, cost, quality, security, contract and human resources and other enterprise internal management systems to ensure that they exercise their rights according to law, perform obligations, consciously observe the rules on market competition, legally protect their own rights and interests, so that the phenomenon of failing to fully observe laws and operating in violation of law is brought under notable check and a legal atmosphere of "stressing credit externally, operating according to law, paying attention to system internally and managing according to law" is created, and that this system can genuinely become a legal entity and competitive mainstay featuring independent management, assumption of one's own profit and loss, self-restraint and self-improvement.

Make Good, Comprehensive Coordination, Joint Efforts to Create a Favorable Environment for the Development of Small and Medium Enterprises.

The said Law stipulates that State Council departments in charge of enterprise work shall be responsible for organizing implementation of policies and plans related to the country's small and medium enterprises and conduct comprehensive coordination, guidance and service for these enterprises. Local people's governments at or above the county level, their affiliate departments in charge of enterprise work and other relevant departments .shall, within the limits of their respective responsibilities, provide guidance and service for the small and medium enterprises within their own administrative regions.

This is the requirement set for the State Economic and Trade Commission and local economic and trade committees at various levels, we must, basing ourselves on the reality of economic development, earnestly do the coordination, guidance and service work well in light of local conditions.

Countries with a developed market economy usually place the emphasis of management of the mainstay of market operation on small and medium-sized enterprises, such management finds expressions mainly in the aspects, such as formulation of related policies and guidance, coordination, supervision and particularly service.

China is building a socialist market economy structure, while realizing the goal of separating government administration from enterprise management, decontrolling and invigorating small and medium enterprises, and letting enterprises operate according to the market rules, the various relevant departments should, in line with the stipulations of the said Law, earnestly perform their important duties of promoting the development of such enterprises.

In 2000, the State Council set up a national leading group for the work of promoting the development or small and medium enterprises which was headed by the State Economic and Trade Commission and with the participation of 12 departments, including the Ministry of Science and Technology, the Ministry of Finance, the People's Bank of China and the General Administration of Taxation, the group is in charge of overall planning, comprehensive coordination and making decisions on major issues concerning the work of small and medium enterprises, its working body is housed in the State Economic and Trade Commission. Under the leadership of the State Council, it is, therefore, necessary to give full play to the role of the leading group in organizing, coordinating and handling major issues related to the work of small and medium enterprises, strengthen coordination and collaboration of the work among departments, stimulate the enthusiasm of various quarters and make joint efforts to do the work related to small and medium enterprises well.

At the same time, in light of their actual conditions, the various localities should strengthen leadership, have a clear idea about the focus of their work, properly implement the Law on the Promotion of Small and Medium-sized Enterprises in an active, steady and orderly manner and promote the sound development of small and medium enterprises according to law.

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