In this article the Moore experts in Shanghai, China, give an insight into the impact of the Coronavirus outbreak on the economy and businesses, and the measures the Chinese government has implemented to support companies through these tough times.
At the end of January, when the disease started to spread at a larger scale, the Chinese government took drastic measures to prevent the spread of the virus, heavily impacting the daily lives of the people in China.
Firstly, the government put the city of Wuhan, with about 11 million inhabitants, in lockdown. Other cities soon followed suit, increasing the total people in lockdown in China to approximately 60 million. Moreover, the central government extended the Chinese New Year holiday nationwide until the 2nd February, with the majority of local authorities disallowing non-essential companies to resume work before February 10.
These reduced activities are likely not the only negative effect businesses will experience in relation to the outbreak, but companies in- and outside China will likely experience economic, social and political consequences. The current economical consequences are often compared with the SARS outbreak in 2003, however, it should be noted that in 2003 the Chinese economy was less reliant on services and was arguably in a stronger position than it is now. Furthermore, in 2020 the Chinese government is already challenged with slower economic growth than previous years.
Government policies to support businesses
As a result of the outbreak of the new Coronavirus, the Chinese government has implemented various strict measures to prevent further spread of the virus. Some of these measures severely hamper the business activities of companies, with especially SMEs heavily affected. Certain industries, such as the transportation, catering, accommodation and tourism sectors, are relatively hard hit as well.
To support businesses through this difficult time, the government, both on the local and national level, has implemented several measures to support businesses and the economy. Below we provide an overview of the general measures and guidelines provided by the Central government.
1. Social insurance premium calculation shifted
The adjustment of the social security payment base has been postponed from 1 April to 1 July 2020.
2. Exemption and 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, whereas contributions for these expenses are halved for large enterprises outside of Hubei from February to April. All companies in Hubei Province are exempt from February to June for all of the social insurance contributions.
3. Increase in losses carry over period
The longest carry-over period for losses incurred by enterprises in difficult industries, including transportation, catering, accommodation and tourism, affected by the epidemic in 2020 is extended from 5 to 8 years.
4. Additional funds for financial institutions
Using the role of a structural monetary policy tool, the People's Bank of China has specially arranged a special loan of 300 billion yuan to support financial institutions in providing preferential interest rate loans to key enterprises for epidemic prevention and control.
5. Financing support
Local governments and financial institutions should support SMEs with emergency financing. The government has made available funds to local governments and financial institutions to provide loans to businesses. Moreover, corporate financing and guarantee fee rates have been decreased.
6. VAT exemption
Taxpayers that are providing public transport services, living services (incl. cultural and sport services, education and medical services, tourism and entertainment services, and catering and accommodation services) and express delivery services for residents shall be exempted from VAT as of 1 January onward.
It is important to note that local government authorities are responsible for the further implementation of the guidelines and directives from the Central government, and this implementation may vary depending on the locality. Therefore, we advise all businesses to keep an eye on announcements from their local provincial-, municipal- or city-level authorities. In general, the majority of local authorities have implemented a form of the following measures:
- Rent compensation
- Reduction or exemption of real estate and urban land use taxes
- Deferred tax payments
- Refund of unemployment insurance payments
- Lower General Costs
How the Shanghai office supports
Our colleagues in Shanghai support foreign companies in China with a full range of financial services, delivering transparency, compliance and sustainability to businesses. Since 2011, they have supported foreign enterprises across all provinces of Mainland China and Hong Kong with Accounting, Tax, Compliance and Corporate Services. To help companies with difficulties resulting from the epidemic, they stay on top of government announcements to identify policy measures that can be beneficial for foreign enterprises active in China.
To help companies from the Benelux, our Shanghai office has worked together with the Benelux Chamber of Commerce in Shanghai to conduct a survey into the effects of the virus outbreak and to form an expert panel to answer questions of companies regarding finance-, tax- and accounting related problems. The report on the survey with guidance from Raoul Schweicher, the Managing Director of our Shanghai office, can be found
On top of that, a full article including the specific local measures in selected regions is constantly kept up to date to provide our clients and partners with relevant information regarding the outbreak and the support measures of the government. The full article can be found
Our full team (including our colleagues Eva and Jenny whom are currently in self-quarantine) look forward to continue to support your business and ensure the standards you have come to expect from us!