China has issued updated guidance for businesses that wish to close their doors. In 2021, for the first time in twenty years, small business closures exceeded new openings .
On December 29, 2021, five state agencies jointly issued the “Guidelines for Enterprise Deregistration (Revised in 2021).” The five state agencies are the State Administration for Market Regulation, the Ministry of Human Resources and Social Security, the Ministry of Commerce, the General Administration of Customs, and the State Administration of Taxation.
Before a business officially terminates, the Guideline requires the company must declare its dissolution, establish a liquidation team, liquidate its property, pay taxes, clear up debts, and pay employee wages and social insurance. After the liquidation, the business can deregister and ceases to exist.
The authorities updated the deregistration guideline after the time when many small businesses folded in 2021.
According to the South China Morning Post, in the first 11 months of 2021, about 4.37 million Chinese small and micro businesses closed their doors. That was more than three times the number of small and micro enterprises that opened in the same period.
On average, more than 390,000 small and micro businesses deregistered each month in 2021, compared to 370,000 in 2020. The deregistration in 2021 also outnumbered new registration for the first time in 20 years.
It is predicted that the 2021 annual deregistration is likely to exceed the all-time high of 4.45 million in 2020. The 2020 number almost doubled that of 2019, and the 2019 number was about ten times that of 2018.
Small and micro businesses are an important foundation of China’s national economy, accounting for half of China’s tax revenue, 60 percent of GDP, and 80 percent of urban employment.
China Central TV, December 29, 2021
Zaobao.com, December 31, 2021