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Dec 31, 2019

Law of the People's Republic of China on Promotion of Small and Medium Enterprises

Revised on 1 September 2017 by the 29th Session of the Standing Committee of the 12th National People's Congress

Chapter 1 General Principles
 
Article 1 This Law is formulated for the purposes of improving upon the business environment for small and medium enterprises, ensuring that small and medium enterprises participate in market competition fairly, protecting the legitimate rights and interests of small and medium enterprises, supporting entrepreneurship and innovation of small and medium enterprises, promoting healthy development of small and medium enterprises, increasing employment in urban and rural areas, and optimizing the important role of small and medium enterprises in national economy and social development.

Article 2 Small and medium enterprises referred to in this Law shall mean enterprises of relatively smaller scale in terms of staffing and business operations, which are established in the People's Republic of China pursuant to the law, including medium-sized enterprises, small-sized enterprises and micro enterprises.
The categorization standards for medium-sized enterprises, small-sized enterprises and micro enterprises shall be formulated by the State Council department responsible for comprehensive administration of promotion of small and medium enterprises, jointly with the relevant departments of the State Council, in accordance with indicators such as the enterprise's staff headcount, business revenue, total assets etc.., and taking into account industry characteristics, and reported to the State Council for approval.

Article 3 The State shall treat development of small and medium enterprises as long-term development strategies, persist on equal rights, equal opportunities and equal rules for various types of enterprises, implement the policies of active support, strengthened guidance, improved services, standardization pursuant to the law, and protection of rights and interests for small and medium enterprises, particularly small and micro enterprises, to create an environment favorable for establishment and development of small and medium enterprises.

Article 4 Small and medium enterprises shall operate pursuant to the law, comply with State laws and regulations on labor employment, work safety, occupational health, social security, resources and environment, quality standards, intellectual property, fiscal policies and taxes etc.., adhere to the principles of honesty and integrity, standardize internal management, and improve business management standard; shall not harm the legitimate rights and interests of workers; and shall not harm public interest.

Article 5 The State Council shall formulate policies for promoting development of small and medium enterprises, establish a coordination mechanism for promotion of small and medium enterprises, and coordinate promotion of small and medium enterprises nationwide.
The State Council department in charge of comprehensive administration for promotion of small and medium enterprises shall organize and implement policies for promotion of small and medium enterprises, implement macro guidance, integrated coordination, and supervision and inspection for promotion of small and medium enterprises.
The relevant departments of the State Council shall, based on the State policies for promoting development of small and medium enterprises, take charge of promotion of small and medium enterprises within the scope of their respective duties.
All levels of People's Government of county level and above shall establish a coordination mechanism for promotion of small and medium enterprises based on actual conditions, specify the corresponding department which is responsible for comprehensive administration of promotion of small and medium enterprises, to take charge of promotion of small and medium enterprises within their administrative region.

Article 6 The State shall establish a statistics monitoring system for small and medium enterprises. The statistics department shall strengthen statistical investigation, monitoring and analysis for small and medium enterprises, announce the relevant information on a regular basis.

Article 7 The State shall promote establishment of a small and medium enterprises creditworthiness system, establish a public creditworthiness information collection and appraisal system, to achieve public enquiry, exchange and sharing of creditworthiness information of small and medium enterprises.

Chapter 2 Fiscal and Tax Support
 
Article 8 The Central fiscal authorities shall establish small and medium enterprises item in its fiscal budget, and arrange for special funds for development of small and medium enterprises.
All levels of People's Government of county level and above shall, based on actual conditions, arrange a special fund for development of small and medium enterprises in their fiscal budget.

Article 9 The special fund for development of small and medium enterprises shall be used specifically for establishment of a public services system and a financing service system for support of small and medium enterprises, through funding, procurement services, incentivization etc..
The special fund for development of small and medium enterprises shall be inclined towards small and micro enterprises, and administration of funds shall adhere to the principles of openness and transparency, and be subject to budget performance management.

Article 10 The State shall establish a small and medium enterprises development fund. The small and medium enterprises development fund of the State shall adhere to the principles of policy orientation and market orientation, and mainly be used for guidance and driving social funds to support small and medium enterprises in start-up phase, and to promote entrepreneurship and innovation.
All levels of People's Government of county level and above may establish a fund for development of small and medium enterprises.
The measures on establishment and use of the fund for development of small and medium enterprises shall be stipulated by the State Council.

Article 11 The State shall implement tax policies favorable for development of small and micro enterprises, implement measures such as deferment, reduction and exemption of enterprise income tax, value-added tax for qualified small and micro enterprises pursuant to the provisions, simplify the procedures for administration of levying and collection of taxes, and reduce the tax burden of small and micro enterprises.

Article 12 The State shall implement reduction and exemption of administrative fees and charges for small and micro enterprises, to reduce the burden of small and micro enterprises.

Chapter 3 Financing Promotion

Article 13 Financial institutions shall play the role of servicing real economy, and provide efficient and fair services for small and medium enterprises.

Article 14 The People's Bank of China shall apply monetary policy tools comprehensively, encourage and guide financial institutions to enhance credit support for small and micro enterprises, and improve the financing environment for small and micro enterprises.

Article 15 The banking regulatory authority of the State Council shall formulate differential regulatory policies for provision of financial services by financial institutions to small and micro enterprises, adopt reasonable measures such as raising tolerance for poor-performing loans to small and micro enterprises, guide financial institutions in increasing financing scale and proportion for small and micro enterprises, and raise the standard of financial services.

Article 16 The State encourages various types of financial institutions to develop and provide financial products and services for small and medium enterprises.
Policy financial institutions of the State shall, within their scope of business, adopt various forms to provide financial services for small and medium enterprises.

Article 17 The State promotes and supports establishment of an inclusive financial system, promotes orderly and healthy development of small and medium banks, non-deposit-taking money lenders and online financial services, guides banking financial institutions in extending their outlets and businesses towards counties and townships etc.. which have weak financial services for small and micro enterprises.
Large State-owned banks shall establish inclusive financial institutions to provide financial services to small and micro enterprises. The State promotes other banking financial institutions to establish organizations to provide financial services exclusively to small and micro enterprises.
Regional small and medium banks shall actively provide financial services to small and micro enterprises at their respective location, to promote development of real economy.

Article 18 The State shall improve upon the multi-tier capital market system, promotes equity financing through multiple channels, develop and standardise the debentures market, promote small and medium enterprises to make use of multiple methods to obtain financing directly.

Article 19 The State shall improve upon the secured financing system, support financial institutions to provide secured financing to small and medium enterprises which pledge their accounts receivable, intellectual property, inventory, machinery and equipment etc.. as collaterals.

Article 20 When a small or medium enterprise pledges its accounts receivable to apply for secured financing, the payor of the account receivables shall promptly confirm the creditor and debtor relationship to support financing for the small or medium enterprise.
The State encourages small and medium enterprises and payors to confirm their creditor and debtor relationship through the accounts receivable financing service platform, improve financing efficiency, and lower financing costs.

Article 21 People's Governments of county level and above shall establish a small and medium enterprises policy credit guarantee system, to encourage all types of guarantee organizations to provide credit guarantee for small and medium enterprises to obtain financing.

Article 22 The State promotes insurance organizations to carry out loan guarantee insurance and credit insurance businesses for small and medium enterprises, and to develop insurance products suitable for the needs of small and medium enterprises for risk spreading and compensation of losses.

Article 23 The State supports credit investigation organizations to develop credit investigation products and services for small and medium enterprises, and to collect information pursuant to the law from the relevant government departments, public utilities organizations and commercial organizations.
The State encourages third party rating organizations to provide rating services to small and medium enterprises.

Chapter 4 Entrepreneur Support
 
Article 24 People's Governments of county level and above and their relevant departments shall provide legal and policy consultation and public information services pertaining to industry and commerce, fiscal and tax, financial, environmental protection, work safety, employment, social security etc. through government websites and propaganda materials etc. free of charge to entrepreneurs.

Article 25 Small and micro enterprises established by tertiary institution graduates, military veterans, unemployed persons and disabled persons etc. shall enjoy tax incentives and fee reduction and exemption pursuant to the provisions of the State.

Article 26 The State adopts measures to support investment of social funds in small and medium enterprises. Venture capital enterprises and individual investors investing in technology innovation enterprises in the start-up phase shall enjoy tax incentives pursuant to the provisions of the State.

Article 27 The State shall improve upon entrepreneurship environment, optimize examination and approval workflow, ensure convenient administrative licensing for small and medium enterprises, and reduce costs of establishment of small and medium enterprises.

Article 28 The State encourages establishment of entrepreneur and incubation bases for small and micro enterprises, to provide manufacturing and business premises and services for small and micro enterprises.

Article 29 All levels of local People's Government shall, based on the needs for development of small and medium enterprises, arrange for requisite land use and facilities in urban-rural planning, provide convenience for small and medium enterprises to obtain manufacturing and business premises.
The State supports the use of idle commercial premises, industrial factories, corporate warehouses and logistics facilities etc., to provide low-cost manufacturing and business premises for entrepreneurs.

Article 30 The State encourages online platforms to open up technical, development, marketing, promotion resources etc. to small and medium enterprises, to enhance sharing and cooperation of resources, and to provide services for start-up of small and medium enterprises.

Article 31 The State simplifies deregistration procedures for small and medium enterprises, to provide convenient market exit for small and medium enterprises.
Chapter 5 Innovation Support

Article 32 The State encourages small and medium enterprises to carry out technical, product, management model, business model innovation etc. in accordance with market needs.
Where there is a need for accelerated depreciation of fixed assets of small and medium enterprises due to technological advancement etc., the enterprise may adopt reduced depreciation period or accelerated depreciation method pursuant to the law.
The State shall improve upon the policies for additional deduction of research and development expenses for small and medium enterprises, to support technical innovation by small and medium enterprises.

Article 33 The State supports small and medium enterprises to apply modern technological means such as Internet, cloud computing, big data, artificial intelligence etc. during their R&D design, manufacturing, business operation stages, innovate manufacturing methods, and improve manufacturing and business efficiency.

Article 34 The State encourages small and medium enterprises to participate in key common technical research and development projects and implementation of research projects established using fiscal funds.
The State promotes military-civilian integration, and supports participation by small and medium enterprises in national defense R&D and manufacturing activities.
The State supports participation by small and medium enterprises and the relevant industry associations of small and medium enterprises in formulation of standards.

Article 35 The State encourages small and medium enterprises to carry out research and development of technologies and products for which they own intellectual property, standardize management of internal intellectual property, and improve their ability for protection and application of intellectual property; encourages small and medium enterprises to purchase intellectual property insurance; reduces the fee burden of small and medium enterprises in applying for and maintaining intellectual property.

Article 36 The relevant departments of People's Governments of county level and above shall provide planning, land use, fiscal support etc., and promote establishment and development of various types of innovative service organizations.
The State encourages various types of innovation service organizations to provide technical information, R&D design and application, quality standards, lab testing, inspection and testing, technology transfer, technical training services etc. for small and medium enterprises, promotes commercialization of technological achievements, and promotes technology and product upgrade by enterprises.

Article 37 The relevant departments of People's Governments of county level and above shall widen channels, adopt subsidy and training measures etc., guide tertiary institution graduates to be employed with small and medium enterprises, and assist small and medium enterprises in introduction of innovation talents.
The State encourages scientific research institutes, tertiary institutions and large enterprises etc. to open up their lab facilities to small and medium enterprises, carry out technical research and development and cooperation, and assist small and medium enterprises in developing new products and cultivating professional talents.
The State encourages scientific research institutes and tertiary institutions to support their technical staff to engage in manufacturing-academic-research cooperation and commercialization of technological achievements with small and medium enterprises in the form of part-time, adjunct or project cooperation form etc., and obtain the corresponding remuneration pursuant to the relevant provisions of the State.

Chapter 6 Market Development
 
Article 38 The State shall improve upon the market system, implement a unified market admission and market supervision system, crack down on monopoly and unfair competition, and create a fair competition market environment for small and medium enterprises.

Article 39 The State supports large enterprises to build up a cooperation relationship with small and medium enterprises which is based on market allocation of resources and has stable supply of raw materials, manufacturing, sale, service outsourcing, technological development and technological transformation etc., to drive and promote development of small and medium enterprises.

Article 40 The relevant departments of the State Council shall formulate the relevant preferential policies for small and medium enterprises in relation to government procurement, adopt measures such as formulation of standards for procurement needs, reserved procurement quota, price review incentives, priority procurement etc., to improve the government procurement quota for small and medium enterprises.
The procurement quota reserved for small and medium enterprises shall constitute 30% or more of the total government procurement budget of the department for the year; therein the quota reserved for small and micro enterprises shall not be less than 60%, except for goods and services which are not provided by small and medium enterprises.
Government procurement shall not implement differential treatment or discriminatory treatment towards small and medium enterprises in terms of equity structure, years of business operation, scale of business and financial indicators etc. of the enterprise.
Government procurement departments shall promptly announce procurement information to the public through the media designated by the government procurement regulatory authorities, and provide guidance and services for small and medium enterprises to obtain government procurement contracts.

Article 41 The relevant departments of People's Governments of county level and above shall guide and assist exportation of goods and services by small and medium enterprises in aspects of legal consultation, intellectual property protection, technical trade measures, product certification etc. to, and drive economical and technical cooperation and exchange with overseas parties.
The relevant policy financial institutions of the State shall, through export credit, export credit insurance businesses, support small and medium enterprises in expanding overseas markets.

Article 42 The relevant departments of People's Governments of county level and above shall facilitate the use of foreign currencies, inbound and outbound trips of staff of small and medium enterprises etc., and support small and medium enterprises to make overseas investments and expand international markets.

Chapter 7 Service Measures
 
Article 43 The State shall establish and improve upon the public services system for small and medium enterprises to provide services for small and medium enterprises.

Article 44 All levels of People's Government of county level and above shall, based on actual needs, establish and improve upon public services organizations for small and medium enterprises, to provide public service for small and medium enterprises.

Article 45 The departments of People's Governments of county level and above responsible for comprehensive administration for promotion of small and medium enterprises shall establish a cross-department policy information online dissemination platform, promptly compile various government services information on laws and regulations, entrepreneurship, innovation, financial, market, protection of rights and interests etc. in relation to small and medium enterprises, and provide convenient services for small and medium enterprises free of charge.

Article 46 The State encourages various types of service organizations to provide start-up training and counselling, intellectual property protection, management consultation, information consultation, credit services, sales and marketing, project development, investment and financing, financial accounting and tax, intellectual property trading, technical support, introduction of talents, overseas cooperation, exhibition, legal consultation services for small and medium enterprises.

Article 47 The departments of People's Governments of county level and above responsible for comprehensive administration for promotion of small and medium enterprises shall arrange funding, and systematically organise and implement training for business management personnel of small and medium enterprises.

Article 48 The State supports the relevant organizations and tertiary institutions to conduct training for business management, production and technical staff etc. of small and medium enterprises, and improve marketing, management and technical level of enterprises.
The State supports tertiary institutions, vocational institutes and all types of vocation training organizations to cooperate with small and medium enterprises in establishing internship and apprenticeship bases, supports bilateral exchange between teachers of vocational institutes and schools and technical staff of small and medium enterprises, and innovates talent training models of small and medium enterprises.

Article 49 The relevant industry associations for small and medium enterprises shall protect the legitimate rights and interests of members pursuant to the law, reflect views of members, strengthen self-governance administration, and provide start-up, innovation and market expansion services etc. for small and medium enterprises.

Chapter 8 Protection of Rights and Interests
 
Article 50 The State protects the property rights and other legitimate rights and interests of small and medium enterprises and their capital contributories. No organization or individual shall infringe upon the property and legitimate earnings of small and medium enterprises.

Article 51 The departments of People's Governments of county level and above responsible for comprehensive administration for promotion of small and medium enterprises shall establish designated channels, heed the opinions and recommendations of small and medium enterprises with respect to the relevant government administration, and promptly provide feedback to the relevant authorities.
The relevant departments of all levels of People's Government of county level and above and the relevant industry associations shall announce contact details, accept complaints and reports from small and medium enterprises, and investigate and handle the complaints and reports within the stipulated period.

Article 52 All levels of local People's Government shall implement administrative licensing pursuant to the law, and carry out administration pursuant to the law; shall not implement inspection when there is no legal or regulatory basis, and shall not coerce small and medium enterprises directly or under any disguise to participate in examination, appraisal, commendation, training etc..

Article 53 State agencies and institutions and large enterprises shall not delay payment to small and medium enterprises for goods, projects and services.
Small and medium enterprises shall have the right to require the payees to pay the amount in arrears and to compensate the losses arising from the late payment.

Article 54 No organization shall collect fees from small and medium enterprises against laws and regulations; shall not impose fines when there is no legal or regulatory basis, and shall not give monies and properties to small and medium enterprises. Small and medium enterprises shall have the right to refuse the aforesaid act and the right to report or file a lawsuit.

Article 55 The State shall establish and implement a list of administrative fees and charges for enterprises and institutions; the list of administrative fees and charges and implementation thereof shall be announced to the public and subject to public supervision.
No organization shall collect administrative fees outside the list from small and medium enterprises, or arbitrarily raise fee rates and increase fee items for small and medium enterprises; or coerce small and medium enterprises to sponsor or donate, subscribe to newspapers, join social bodies or accept designated services; industry associations shall not arbitrarily set up fee items or increase fee rates when they exercise government functions on behalf or utilize administrative resources.

Article 56 The relevant departments of all levels of People's Government of county level and above shall implement supervision and inspection over small and medium enterprises pursuant to the law, and establish a random inspection mechanism. Where multiple supervision and inspection matters by the same department on a small or medium enterprise can be merged, such supervision and inspection matters shall be implemented together; where multiple supervision and inspection matters by different departments on a small or medium enterprise can be merged, the People's Government of counterpart level shall organize the relevant departments to implement together or conduct joint inspection.

Chapter 9 Supervision and Inspection
 
Article 57 People's Governments of county level and above shall organize supervision and inspection over promotion of small and medium enterprises on a regular basis; violations of this Law shall be promptly corrected, and the directly accountable person(s)-in-charge and other directly accountable personnel shall be punished pursuant to the law.

Article 58 The State Council department responsible for comprehensive administration for promotion of small and medium enterprises shall entrust a third party organization to conduct environmental assessment for development of small and medium enterprises on a regular basis, and announce to the public.
All levels of local People's Government may, based on actual circumstances, entrust a third party organization to assess the environment for development of small and medium enterprises.

Article 59 People's Governments of county level and above shall organize, on a regular basis, enterprise evaluation, public evaluation and dynamic assessment of the use of fund in terms of the specific development fund for small and medium enterprises as well as the results of utilization of development fund by small and medium enterprises, promptly announce the assessment and evaluation results to the public, and be subject to public supervision.
The relevant departments of People's Governments of county level and above shall, within their respective scope of duties, supervise the management and use of the specific development fund for small and medium enterprises as well as the development fund for small and medium enterprises, investigate and deal with acts of interception, misappropriation, embezzlement, encroachment and corruption pertaining to the specific development fund for small and medium enterprises as well as the development funds for small and medium enterprises, and punish the directly accountable person(s)-in-charge and other directly accountable persons pursuant to the law; where the case constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.

Article 60 The relevant departments of all levels of People's Government of county level and above shall, within their respective scope of duties, investigate and deal with acts of coercing small and medium enterprises directly, or under any disguise, to participate in examination, appraisal, commendation, training etc., or collecting fees and fines from small and medium enterprises, or apportioning property to small and medium enterprises illegally, as well as other acts of infringing the legitimate rights and interests of small and medium enterprises, and punish the directly accountable person(s)-in-charge and other directly accountable persons pursuant to the law.

Chapter 10 Supplementary Provisions
 
Article 61 This Law shall be implemented with effect from 1 January 2018.
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