China has announced a new regulation to be introduced on 1 September in order to ensure the timely payment of owed funds towards SMEs. This regulation will better safeguard the legal rights and interests of SMEs and private enterprises that are having a hard time doing business in the current post-COVID-19 environment.
SMEs in China generate approximately 60 percent of the GDP in the nation and account for about 80 percent of jobs. As such, SMEs have proven themselves to be an important pillar of China’s economy and social stability. Therefore, ensuring punctual payments is crucial to keep the gargantuan economy going.
“SMEs have been greatly affected by the COVID-19 outbreak. With the contagion increasingly coming under control, the resumption of work and production as well as a series of policy supports from government, the operating conditions of enterprises have improved month by month,” said Zhang Jingqiang, executive president of the China Association of SMEs.
However, Zhang said the SMEs are relatively more susceptible to risks caused by the epidemic and still confronted with severe challenges in complex circumstances.
According to Zhang, financial strain remains the top concern among most SMEs in the country and is also the biggest constraint for the development of small ventures and microbusinesses; all this is despite the governments efforts to support these businesses.
The danger of bankruptcy is very real for SMEs who cannot obtain their funds in a timely manner. This situation is exasperated by the disruption caused by the COVID-19 pandemic. While the economic situation is improving, the risks still remain until the world completely returns to normalcy. The regulation will further improve the legal system that is conducive to the healthy development of SMEs.
Noting SMEs play a crucial role in expanding employment and improving people’s livelihood, Vice-Minister of Industry and Information Technology Wang Jiangping said the regulation will ensure government departments, public institutions and large enterprises pay SMEs on time and this will invigorate the liquidity of SMEs.
It will also safeguard the legitimate rights and interests of SMEs, reduce their operational costs and optimize the business environment, Wang said.
This new regulation brings with it a mechanism for the disclosure of information regarding overdue payments to SMEs within the prescribed time limit. Also, the system of complaint handling, punishment for acts of bad faith, as well as supervision and evaluation will be set up to protect the legitimate rights of SMEs.