collective enterprises such as joint-stock cooperatives; synchronously carry out reform measures such as contracting, leasing, merging, selling... In the "National Industrial Policy 2002", the State especially encourages township enterprises to rely on scientific and technological advances, attach importance to scientific management, and improve the quality and efficiency of enterprises. These enterprises have linked "production-study-research" with local institutes and universities. Research units have science, experts, and technology, township enterprises have capital and premises. Their links make scientific research results quickly transformed into productive forces. Although research at this level and the capital potential of township enterprises cannot create technology to replace modern technology in CNPT production, it also contributes to improvements in the production process and increases efficiency.
1.2. For State-owned enterprises.
In the CNPT industry, which is used to top-down integrated production, the quality of the products these enterprises provide is not accepted in the market and is often only consumed internally. Therefore, China has introduced a series of policies to reform this sector, deepening the reform of small state-owned enterprises.
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The 14th National Congress of the Communist Party of China in 1992 stated: "Some small state-owned enterprises can be leased or sold to business groups and individuals". The 3rd Central Conference of the 14th tenure in 1993 emphasized: "Small state-owned enterprises can implement the business contracting system, lease business capital, can be converted to joint-stock cooperatives, and can also be sold to groups or individuals". After the 7th Central Conference of the 14th tenure of the Communist Party of China, China abolished state ownership of Vietnamese SMEs in common competitive fields to focus on
Transforming the business mechanism of large enterprises and economic groups, building a modern business regime. This policy quickly spread widely, becoming the first choice for reforming collective enterprises.
Currently, orders are mainly undertaken by large enterprises and then distributed to Vietnamese SMEs with contractual relationships. The above policy has ended the previous state-owned enterprises' production model in the supporting industry.
1.3. For non-public enterprises
Under the planned subsidy system before 1978, the non-public ownership system was considered to be in opposition to and unable to coexist with the public ownership system. Not allowing the development of the private economy led to a long period of economic stagnation and a serious waste of resources. Since the reform and opening up, Chinese leaders have recognized the importance of the “necessary supplement” which is the non-public economic sector. Policies have been introduced to support the development of this economic sector. Non-public enterprises have gradually developed into important economic growth points, contributing to solving industry difficulties and improving people's living standards.
2. Creating an equal legal environment.
In the past, investors were reluctant to invest in China due to the discrimination between large and small enterprises, state-owned enterprises and private enterprises, domestic and foreign enterprises. Since the economic reform, especially to attract foreign investment and negotiate WTO accession, China has made efforts to build an attractive investment environment through an equal legal environment. This has greatly facilitated SMEs, especially private enterprises. Policies
The basic principles that the Government has put forward through the “Enterprise Law” are: Ensuring the rights of private property as public property, no one can infringe; collecting taxes fairly; implementing equality in all aspects; eliminating concerns for the small and medium-sized supporting enterprises, encouraging increased investment in production, expanding business scale, and upgrading enterprises. With such a policy, the private sector has changed from being considered the “tail of capitalism” to “developing together” with the public economy. This is truly a big step forward for private enterprises. Thanks to the peace of mind that property rights are guaranteed, small and medium-sized supporting enterprises focus on production, promoting their positivity, creativity and sensitivity, bringing high economic efficiency to society and the enterprises themselves.
3. Tax incentives
Tax is an effective tool for the State to regulate and control. In late 1999 and early 2000, the Ministry of Finance and the State Tax Department issued notices on tax collection to encourage enterprises to "enhance technical innovation, develop high technology, and upgrade their industries". In July 2000, these agencies again issued development incentives such as: corporate tax exemption and reduction, increased value-added tax and retail tax rates, etc.
Localities also offer preferential policies in their localities such as policies to attract talent, lower registration criteria for enterprises, encourage the development of high-tech SMEs, increase financial investment, build a budget for high-tech scientific and technological innovation, issue invention licenses and additional allowances to maintain technical innovation activities... Incentives in special economic zones are even greater.
Specifically, corporate income tax and import-export tax are as follows:
3.1. Corporate income tax
In 1994, the corporate income tax rate was 33%. To encourage SMEs, the corporate income tax rate was reduced to 18% if the annual profit of the enterprise was less than 30,000 yuan, and to 27% if the profit was greater than 30,000 yuan but less than 100,000 yuan.
Since July 1998, small enterprises with annual turnover of less than 1.8 million yuan will have their value added tax reduced by 4% or more according to regulations (the value added tax rate before that time was 17%). However, SMEs operating in the industrial sector are currently charged a higher value added tax than the actual value added and are not entitled to tax refunds. In the near future, China will introduce a consumption-oriented value added tax regulation instead of the current production-oriented one to further encourage SMEs to participate in industrial production.
According to Article 24 of the Law on Promoting the Development of Vietnamese SMEs in 2003, Vietnamese SMEs operating in the IT sector will receive tax reductions and tax exemptions for 2-3 years more than enterprises outside the IT sector. If the enterprise creates jobs for the unemployed and the number of unemployed people accounts for more than 60% of the total number of workers of the enterprise, the enterprise will be exempted from corporate income tax for 3 years.
In particular, if these SMEs invest in the economic zone, the corporate income tax will be only 15%. If the enterprise has more than 70% of its products exported, it will be reduced by another 5%. If the business period in the economic zone is more than 10 years, the tax exemption period is 5 years according to the 2 + 3 method, meaning that the enterprise is exempted from tax for the first 2 years and the next 3 years will be reduced by 50%.
3.2. Import and export tax
Reducing tariffs will improve the cost competitiveness of assemblers and can turn the country into an export base for finished products. Moreover, not all countries have all kinds of raw materials, so reducing import tariffs on raw materials will help reduce costs for supporting businesses.
To promote small and medium-sized supporting enterprises, China has introduced many import tax incentives. Import tax is calculated according to the principle: tax on raw materials is low, import tax on spare parts will be lower than tax on finished products, implementing liberalization of import of spare parts... Currently, the average tax rate for imported spare parts and accessories is only around 9%. Export tax rates are usually only from 0% to 5%.
4. Financial and credit incentives
4.1. Financial support
For SMEs operating in the supporting industry, capital and direct access to capital from the financial market are considered the biggest difficulties. However, over 80% of enterprises cannot borrow capital from banks. Therefore, the Chinese government encourages small and medium-sized supporting enterprises to access different sources of capital:
- Bank capital : According to the announcement of the People's Bank of China, 3/4 of loans from Chinese financial institutions are classified as working loans. In which, the proportion of working loans from banks and financial institutions for small and medium-sized supporting enterprises has increased significantly. The State allocates 20% of the total lending capital of the 4 major state banks in the official credit source for the private sector. However,
However, banks are hesitant to lend to SMEs for a number of reasons: Firstly , the loan amount is small, so banks do not make much profit from lending activities; Secondly , SMEs almost do not have transparent financial records, are not audited, so the costs related to accurately determining the financial information of SMEs, especially private enterprises, are very high, sometimes higher than that of large enterprises; Thirdly , SMEs have limited assets, so the source of mortgage is also limited. This makes banks hesitant about the solvency of SMEs. Because of these problems, the State encourages SMEs in the IT industry, especially private enterprises, to have a transparent and unified accounting system according to standards, to carry out highly convincing investment projects and to build prestige in the market to borrow unsecured loans from banks.
- Private equity capital: Private equity, especially the venture capital market, is a new but highly effective capital supply channel for Chinese SMEs. Difficulties in accessing state capital have prompted Chinese private enterprises to seek access to this source of capital. Recently, the People's Bank of China has established a venture capital fund to provide additional support to SMEs. In addition, securities companies, asset exchanges, trust funds and investment companies have created conditions for private investment to participate in providing equity capital to private enterprises in an organized and long-term manner. Not only that, large state-owned enterprises listed on the stock market also participate in providing venture capital to SMEs operating in the high-tech, growing sector.
- Capital in the stock market: The biggest feature of the stock market is the ability to gather many small sources of money to supply a large demand for money at the same time, it can create a large capital attraction for giant projects that no bank can lend on its own. Therefore, the stock market is always a very effective capital mobilization channel for businesses. However, for SMEs, accessing this source of capital is still difficult due to the quota system and requirements on scale. Although there is nothing in the Securities Law and public administrative regulations that prevents SMEs from listing publicly, in reality, the Chinese stock market mainly provides capital to state-owned enterprises to reform these enterprises.
In order to encourage SMEs to raise capital in the stock market, the Chinese government has recently issued a number of regulations to facilitate SMEs. In December 1998, the China Securities Law was issued. The new rules in the law paved the way for domestic and foreign insurance companies to purchase A-shares, leading to a greater presence of institutional investors. In March 2000, the “China Securities Regulatory Commission” announced the abolition of the listing quota system and that underwriters would decide the timing and pricing of new securities. This policy has created great opportunities for SMEs to access large and long-term capital in the stock market.
In 2001, the Chinese government revised the nationwide credit access system for SMEs. This system helps select, evaluate and report the credit status of small and medium-sized supporting enterprises.
In late 2001, the SME Department published a draft of pilot activities in supporting financial development for SMEs and pointed out the problems that small and medium-sized supporting enterprises were facing.
Another support from the Government is the Law on Promoting the Development of SMEs. This law states that: SMEs will be included in the national financial budget and there will be special funds reserved for supporting the development of SMEs. Currently, the Chinese Government spends 1 billion yuan annually to support SMEs to encourage them to develop new products, apply modern technology, techniques and production equipment. The Government also spends 500 million yuan to establish a market development fund to support and encourage supporting enterprises to proactively access the world market, participate in international competition, promote exports and strengthen cooperation and exchange of techniques and technologies with foreign countries. These supports not only help overcome the weaknesses of small and medium-sized enterprises in seeking investment capital but also in the journey of technological innovation because SMEs often lack understanding of appropriate technology due to not conducting systematic research on technology and weak market research.
According to Deputy Minister of Finance Zhu Zhigang, in 2006 the Chinese Government allocated 3 billion yuan (375 million USD) to support the development of SMEs and currently the Ministry of Finance is considering adopting more preferential tax policies for small and medium-sized supporting enterprises to facilitate the development of this economic sector.
4.2. Credit guarantee support
Not only is it difficult to access capital, SMEs also face many difficult problems in securing credit such as mortgages.