Economic Impact of Coronavirus and Chinese Government Measures to Support Businesses
At this moment, China and the rest of the world are facing the consequences of an outbreak of the Coronavirus (Covid-19). With 63.935 infected and 1381 resulting deaths as of February 14, the Chinese government has taken drastic measures to combat the spread of the coronavirus. It is expected that people and companies alike, both in and outside China, will experience medical, economic and social consequences as a result of the outbreak and prevention/control measures.
The economic consequences of the current outbreak are often compared with the SARS outbreak in 2003. However, it is important to realize that in 2003 the Chinese economy was less developed and less reliant on services.
Government policies to support businesses
To support businesses through this difficult time, the central and local government has implemented several measures to ease the administrative and financial burden on businesses, and support the economy as a whole. It is important to note that the national government has released mostly directives which are further implemented by local authorities, and its implementation may vary on the provincial-, municipal-, city-, or district-level.
In summary, many of the local authorities offer some form of the following support:
- Rent compensation
Depending on the local authorities, SMEs that rent from state-owned real estate companies will be exempt from rent for 0.5 to 3 months. Private real estate companies are encouraged to do the same. - Deferred tax payments
SMEs can apply for deferring of tax payments up to 3 months depending on the local government. - Refund of unemployment insurance payments
If SMEs minimize layoffs, most local governments offer a percentage of refunds for the paid unemployment insurance contributions over 2019 or 2020. - Lower General Costs
Several regions have lowered electricity prices and suspended administrative charges, such as sewage treatment fees and road occupation fees, among others. - Reduction or exemption of real estate and urban land use taxes
Companies that have difficulties paying real estate and urban land use taxes can apply for reduction or exemption in several regions.
On the national level, the Chinese government also announced the following measures:
- Social Insurance Premium Shifted
The annual adjustment of the social security base has been postponed from April 1st to July 1st, meaning an effective reduction of the social security burden for employers and employees. - Exemption/reduction of Social Insurance Payments
From February to June, all SMEs outside of Hubei Province are exempted from paying the company’s pension-, unemployment insurance- and work injury insurance contributions. Contributions for the above three social insurance contributions are halved for large enterprises outside of Hubei from February to April. And all companies in Hubei are exempt from all social insurance contributions from February to June. - Increase in losses carry over period
The government will ensure that people entitled to payments from the above social insurances will not be affected by this policy and that payments for social securities will be paid in full and on time.
For enterprises in the transportation, catering, accommodation and tourism sectors the carry-over period for losses has been extended from 5 to 8 years. - VAT exemption
Taxpayers which provide public transport services, living services (incl. cultural/sports services, education and medical services, tourism/entertainment services, and accommodation services) and express delivery services for residents shall be exempted from VAT as of January 1st onward.
If you wish to learn more about these measures or which measures are applicable in your locality, please click the link below and read our full article to find an overview of the relevant measures per location.
