As Coronavirus Hampers Business Activity, China Seeks to Ease Financial Pressure

Posted by Reading Time: 4 minutes

By Zoey Zhang, Dezan Shira & Associates Shanghai Office 

On February 3, Shanghai Municipal Human Resources and Social Security Bureau (HRSSB) announced measures to reduce the financial burden on enterprises affected by the coronavirus epidemic.

These measures include refunding unemployment insurance premiums paid, delaying the adjustment period of social insurance contribution base, extending the social insurance payment period, and providing training subsidies.

The measures aim to shore up the confidence of small and medium-sized enterprises (SMEs) in the short-term as their production and operations have been affected by the coronavirus situation and to ensure stable employment in the city. As far as we are aware, these measures apply to both local and foreign-invested enterprises.

Refunding unemployment insurance premiums

In 2020, Shanghai will refund 50 percent of the total unemployment insurance premiums paid in the previous year to enterprises that do not lay off employees or minimize the layoffs. According to the official statement, it’s expected that about 140,000 enterprises in this city will receive back about RMB 2.6 billion (US$370 million).

Delaying adjustment period of social security payment base

This year, the payment period of the social insurance (including employees’ medical insurance) will be delayed for three months from July 1, 2020 to June 30, 2021, which was originally from April 1, 2020 to March 31, 2021.

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This means, the social insurance contribution base can only be adjusted from July 1 instead of April 1.

During the three months from April 1 to June 30, employers and employees will contribute to social security based on the old contribution base, which is usually a smaller base. This change can reduce the burden of corporate social security contributions and increase the disposable income of employees.

It is expected to reduce the social security contribution burden on Shanghai enterprises by RMB 10.1 billion (US$1.44 billion), including RMB 6.4 billion (US$910 million) to the enterprise pension insurance fund and RMB 3.34 billion (US$480 million) to the medical insurance and maternity insurance fund, according to the government’s estimates.

Extending the social insurance payment period

Enterprises and self-employed residents who failed to complete the registration and payment of social insurance on time due to the coronavirus epidemic are allowed to reapply after the epidemic.

Overdue payments of social insurance premiums will not incur late fees or affect the rights and interests of insured individuals if the contributor has reported to the municipal social insurance agency in advance. The relevant social insurance repayment procedures can be completed within 3 months after the epidemic situation is resolved.

Providing training subsidies

All businesses in the city that organize employees’ (including those dispatched to work in this company) participation in various online vocational training, during the suspension of business operations, can enjoy a 95 percent subsidy for their actual training costs.

Shanghai’s initiatives are often taken up or adapted by other regional governments. We will keep readers informed should this happen as and when they are announced. Other incentives we are aware of are discussed below.

Other China national and regional incentives

China’s Ministry of Finance (MOF) has announced the provision of financial support. The People’s Bank of China has stated it will provide support for enterprises affected by the coronavirus by reducing the interest rate on loans.

China’s State Taxation Administration (STA) has extended the tax filing deadline for February, see our article here.

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MOFCOM has issued a circular impacting provident fund payment. If staff are diagnosed with the coronavirus (or any other infectious disease), they can draw upon their housing provident fund benefits to cover medical expenses.

If an employer is unable to make contributions to the housing provident fund on time due to the epidemic, it is permitted to postpone contributions for the time being, so long as they are later made up.

Wholesale and retail companies hit hard by the coronavirus outbreak can apply to delay their contributions until their business turns around.

Numerous local governments, including Shanghai, Beijing, and Suzhou have announced measures to reduce the social insurance contribution burden on enterprises, provide rent subsidies, and exempt enterprises from paying property tax and urban land use tax.

Beijing

Beijing has promised to refund enterprise unemployment insurance premiums without specifying the percentage, extended the collection deadline of social insurance premiums payable in January and February to the end of March (or to end of July for enterprises that have been hit hard by the coronavirus outbreak in the industries like tourism, accommodation, catering, exhibition, trade circulation, transportation, education, training, cultural performances, film, and theater), and provided subsidies for commercial building and shopping mall operators who offered rent exemption for small and medium tenants.

Suzhou

The Suzhou government has urged banks to increase the credit support for and to reduce financing costs of SMEs, pledged 50 percent refund of unemployment insurance premiums, and decided to extend the insurance payment period for up to six months for enterprises seriously affected. For SMEs that rent state-owned assets for business purposes, one-month rent will be exempt and two-month rent will be halved. Eligible enterprises may apply to be exempted from paying property tax and urban land use tax, to defer tax return, not more than three months.

If businesses need assistance with applying for these incentives, please contact us at china@dezshira.com.

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China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com. 

We also maintain offices assisting foreign investors in Vietnam, Indonesia, Singapore, The Philippines, Malaysia, and Thailand in addition to our practices in India and Russia and our trade research facilities along the Belt & Road Initiative.