Measure aims to mitigate COVID-19 challenges for self-employed, give job market lift
China has unveiled a new pro-growth regulation for self-employed business owners, including policies that provide greater support in terms of taxation, finance and the protection of intellectual rights, in a bid to inject fresh impetus into individual and small, family-run businesses.
The Regulation on Advancing the Development of Self-employed Businesses, which came into force on Nov 1, sets out detailed policies on refining the business environment and also on protecting the legal rights and interests of self-employed people.
Other key measures include easing procedures for the self-employed to change ownership and upgrade to enterprise status, and tailored aid packages to help with innovation, financing and professional training.
Analysts and officials said the measures will help the country's 111 million self-employed people through the challenges posed by the COVID-19 epidemic and also stabilize the job market.
On Nov 1, Pu Chun, deputy head of the State Administration for Market Regulation, told a news conference that the regulation, which further clarifies the legal status of self-employed people, includes tailored aid for those who are struggling, as well as measures to improve the business environment and protect their legal interests.
According to the administration, over 111 million self-employed people were registered nationwide as of the end of September, accounting for about 66.7 percent of the country's market players. Up to 90 percent are focused on the service sector, including retail, accommodation and catering and residential services.
Official figures show that close to 300 million people are currently on the payroll at small, family-owned businesses, with each employing an average of 2.68 people.
"Such businesses not only provide many workers with stable incomes, but also provide livelihoods for hundreds of millions of families," Guo Qimin, an official at the National Development and Reform Commission, told the news conference.
"Self-employed people are the lifeblood of industry and supply chains and play unique and pivotal roles in China's industries and market system," he said.
The emergence of new business models in recent years, including livestreaming and e-commerce, have provided further empowerment, with about 30 percent of China's small businesses devoted to sectors involving the use of new technologies and business models, he added.
As a result of recurring COVID-19 outbreaks and sluggish consumer spending, many small businesses are facing difficulties meeting operating costs, hiring employees and obtaining financing.
"Market expectations are unstable, and confidence in growth is far from strong," Pu said. According to the National Bureau of Statistics, the official manufacturing purchasing managers' index for small companies continued to contract, falling to 48.2 last month from 48.3 in September.
The data also showed the PMI for China's nonmanufacturing sector dropping to 48.7 last month, down from 50.6 in September. A PMI reading above 50 indicates expansion, while a reading below indicates contraction.
A survey conducted by the State Administration for Market Regulation showed that the monthly operating revenues of about 80 percent of small businesses amount to less than 10,000 yuan ($1,390), with 57.9 percent of those businesses operating at a loss.
The number of newly registered self-employed individuals rose to 13.59 million in the first eight months of the year, up 6 percent year-on-year but lower than the average growth rate of 11.8 percent registered over the past decade.
Meanwhile, small businesses have also been the recipients of government aid packages since the onset of the COVID-19 epidemic.
Dai Shiyou, head of the Tax Policy and Legislation Department at the State Administration of Taxation, told the news conference that China offered tax cuts and fee reductions in excess of 1 trillion yuan between 2020 and September.
Over 80 percent of small businesses are exempt from paying taxes, while those that continue to pay are paying 40 percent less than in 2019.
Dai said that this year, the government granted a temporary exemption on value-added tax payments to small taxpayers, including self-employed business owners, adding that they are also covered by policies that allow businesses to defer their social security contributions.
Pu said the new regulation has taken common problems facing small businesses into consideration, such as high rents and difficulties in finding business venues.
It stipulates that governments at the county level and above are required to ensure the provision of more venues for small businesses and help them cut costs.
To accelerate the digital transformation, operators of online platforms are required to offer favorable policies for business registration, terms of service and fees, and must not impose unreasonable limits or levy unreasonable fees on self-employed business owners through rules, algorithms and other processes.
Yang Hongcan, head of the Department of Business Registration at the State Administration for Market Regulation, said the move marks the latest efforts to encourage compatriots from Taiwan, Macao and Hong Kong to start new businesses and find jobs on the Chinese mainland.
He said 122 sectors have now been opened to Taiwan residents to start their own businesses, and authorities will provide better services to encourage more young people from the island to explore opportunities across the Straits.
Liang Si, a researcher with the research institute at the Bank of China, said the latest regulation calls for authorities to better monitor and gather information on the operations of self-employed people, which will help the government devise better targeted aid policies.
He said that most small businesses are engaged in sectors that require close social contact, such as retail and residential services, making them more vulnerable to epidemic control measures.
"Most self-employed people or family-run businesses are small-scale, with few assets. They face difficulties in securing funding and are thus the most vulnerable to risks and slowdowns," he said.
He highlighted the need to ensure full implementation of the regulation to deliver tangible benefits to businesses, including steps to expand the coverage of VAT relief for small-scale taxpayers.
"It is also important for the financial sector to design more credit products tailored for self-employed individuals to meet pressing funding demands," he said.