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Private Enterprises in China Face Difficult Business Environment

On September 4, China’s central bank the People’s Bank of China, and the All-China Federation of Industry and Commerce, which is the chamber of commerce for the private sector, held a meeting to discuss how to improve the financing status for private enterprises and small and micro enterprises.

With the ongoing US-China trade war, more uncertainties have been added to the economic situation. Banks are reluctant to lend to private enterprises. Difficulties in financing will hit private investments and affect China’s economy in the second half of the year. China’s state banks have always preferred lending to state-owned enterprises, but small and micro businesses represent the vitality of the national economy. Yi Gang, president of the People’s Bank of China, once said that they contributed to 80 percent of China’s employment, about 70 percent of patent rights, more than 60 percent of gross domestic product (GDP), and more than 50 percent of taxes.

Starting on January 1, 2019, tax authorities will replace the social security bureaus in collecting a number of items now under social security. Since the tax bureaus also collect the salary information, the move will add to the burden on the private sector, as most of the enterprises currently declare their social security obligations at the minimum wage standard.

Additionally, China’s Ministry of Ecology and Environment recently issued a directive that prohibits local governments from shutting down businesses across-the-board or from suspending operations using the excuse of protecting the ecological environment until they have conducted investigations. Local government authorities, when dealing with inspections from environmental protection units, usually place unreasonable restrictions on enterprises, especially private and small businesses.

Source: Central News Agency, September 6, 2018