How can SMEs survive the epidemic?

With the film, catering, transportation, retailing, tourism, export, real estate and labor-intensive manufacturing sectors harshly affected by the ongoing COVID-19 epidemic, how can small and medium enterprises (SMEs) survive the frustrating reality has aroused growing concerns. 

Shen Guobing, professor from the School of Economics, Fudan University, shares his views on how to support and empower these affected businesses to survive the epidemic.

(Shen’s article in Chinese was originally published on The Paper, a Shanghai-based web-native news outlet.)

The following translation is based on an abridged version of the article. 

Resume operation and production, and increase trade and employment

Although China, as the world’s largest trader of goods and 2nd largest consumer of goods, cannot simply be “unpegged” from the rest of the world, it’s reported that the virus outbreak in China has triggered a severe global demand shock, posing a risk for almost every type of bulk commodity trade.

For China, its foreign trade has been mainly with the U.S., European and Japanese markets for their high-tech quality products, advanced equipment and expertise, as well as their well-developed economic systems. Therefore, it’s urgent for China to roll out feasible standards for the operation resumption, while keeping a tight grip on epidemic prevention at workplace at home. Intellectual property protection and institutional innovation should be further strengthened to improve the business environment and restore market confidence, so that more foreign investment and trade will come in and effectively help stabilize the employment rate.

Cut taxes and fees for the affected enterprises to pump liquidity

As of Feb. 6, China has adopted more than 10 fiscal measures to alleviate the burden of enterprises and individuals in the affected areas. These measures can help buttress epidemic-related expenditure, medical R&D investment, and emergency medical supply import; provide subsidies to front-line medical workers and medical supply manufacturers, and reduce or exempt the medical expenses of patients; and disclose information in a timely manner to prevent social unrest. On Feb. 3 and 4, China’s central bank conducted open market operations, injecting 1.7 trillion yuan ($1.19 trillion) to keep the liquidity of China’s banking system at a sufficient level.

Given such situation, the following approaches can be taken into account:

1. To reduce tax/fee, rent and social security payments for the affected enterprises in virus-hit areas;

2. To provide discount interest for enterprises producing epidemic-relief supplies;

3. To increase special refinancing, implement preferential interest rates, and strengthen financial support for manufacturers of medical supplies and daily necessities;

4. To enhance targeted liquidity support and financial support for small and micro businesses, private sectors and manufacturing industry;

5. To offer more credit loans (especially medium- and long-term loans), extend the repayment period for enterprises, and ensure enterprises in industries severely affected by the epidemic receive credit loans.

Promote trade and investment facilitation and public goods service

At this moment, commercial departments, financial institutions, local governments and chambers of commerce need to promote trade and investment facilitation and public goods service to support enterprises in market expansion.

1. China’s commercial counselors stationed abroad should work with cross-border e-commerce enterprises and their overseas branches to open “green channels” thereby facilitating the logistics of medical supplies and mobilizing both domestic and international markets and resources in this virus fight. Fees for customs clearance of medical supplies could be lifted under special circumstances.

2. Commercial and legal service departments need to better understand through dialogues the predicaments facing business owners, especially those engaged in foreign trade. The enterprises unable to resume production should be given necessary legal advice and information. Force majeure certificates can be issued for foreign trade enterprises failing to deliver on time due to the epidemic.

3. Commercial departments, financial institutions, local governments and chambers of commerce should keep in close contact with enterprises via the Internet, providing information on trade liberalization and investment facilitation and assisting qualified and competitive enterprises to expand their business in international markets.

* O artigo foi cedido pela Fudan University

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