Since February 2020, the Shanghai government has released several policy measures to support business industries hit by the COVID-19 outbreak. The policies vary from financial loans, rent reduction, tax exemption, and support for the development of foreign enterprises.
Take a look at our previous post about Support for FIEs in China during the COVID-19 Outbreak
Shanghai has also formulated a policy to create more financial hubs and attract foreign investments. Keep reading to learn more!
Shanghai Banking and Finance
On February 10, 2020, the Shanghai banking authority announced the reduction of financing guarantee rate for related enterprises by 0.5% per year. Furthermore, the city also encouraged all banks to renew loans that are due before June 30, 2020. This applies to customers who have a difficult time repaying amid the COVID-19 outbreak. Besides, they can renew their loans within a year. On the other hand, Shanghai also reduced the reloan guarantee rate for SMEs by half as well as waived the insurance fee.
Moreover, the Shanghai Municipal Commission of Commerce has required banking institutions to focus on meeting the needs of core foreign trade enterprises. The commission aims to expand financial support to enterprises with annual exports ranging from less than USD5 million to less than USD30 million.
Credit and financing policy
The People’s Bank of China has issued a refinancing policy worth RMB300 billion for epidemic prevention and control. It also declared a special rediscount policy worth RMB500 billion to finance enterprises upon resuming production.
The People’s Bank of China-Shanghai will provide USD20 billion worth of special credits for key enterprises in the field of foreign trade and economic cooperation. On the other hand, China Construction Bank has pledged a USD30 billion credit line for major researches and application fields.
Meanwhile, Pudong Development Bank will also provide USD20 billion special credit to key industries related to accommodation, catering and logistics.
Lastly, Shanghai also allocated a special reloan policy for key epidemic prevention enterprises. The People’s Bank of China-Shanghai offers a 50% financial discount for the actual loan interest rate of the enterprise. Further, the Pudong Development Bank of Shanghai and Shanghai Rural Commercial Bank have also reduced the loan lending rate to at least 25 basis points concerning the loan prime rate (LPR). Both banks have also issued preferential loans to relevant enterprises.
Tax exemption, reduction, and deferred payment
From February to March, the Shanghai local government has also exempted small and medium-sized enterprises from paying rent of real estate used for the production and operation of their businesses. Moreover, it extended the tax declaration period from April 20 to April 24, 2020.
Check out more details here: Policies Concerning Tax Payments amid COVID-19
Foreign or international trade
Foreign trade enterprises involved in the export of key epidemic prevention materials for domestic sales will not levy an additional tax burden. On the other hand, imported materials donated for the same purpose will be exempted from import tariffs, VAT and consumption tax. Likewise, imported materials directly used by the health department will be exempted from the tariff. Any collected taxes will be duly refunded.
Furthermore, the Shanghai local council for the promotion of international trade will release a force majeure factual certificate to enterprises affected by the outbreak. This means that foreign enterprises that cannot deliver trade on time may be exempted from contractual obligations.
Shanghai innovation and entrepreneurship
The Shanghai government has allocated funds to support technology-based SMEs through the “China Innovation and Entrepreneurship Competition”.
Moreover, the administration also intends to increase the quota of technology innovation vouchers from 300,000 RMB to 500,000 RMB. It will also subsidize companies with technology-related loans for an amount equivalent to 20% of their interest rates. Moreover, the commission will increase insurance premium allowance for companies engaged in epidemic prevention and control from 50% to 80%.
Culture and entertainment industry
The Shanghai government also paid attention to city life services such as those providing culture and entertainment services. For those belonging to this industry, their advertising revenues are exempted from paying taxes at normally 3% of their sales.
Financial-opening up in Shanghai after COVID-19
Shanghai endeavors to reverse the economic impact of the virus outbreak by strengthening its financial opening-up plan. Thus, the city’s local government has unveiled guidelines to promote the Lingang New Area, speed up access to financial institutions and improve the financial support for the Yangtze River Delta development.
Lingang New Area Pilot FTZ
- Encourage financial institutions and enterprises to invest in fintech companies in the area.
- Establish financial and professional investment subsidiaries to facilitate more equity or direct investments.
- Enable qualified enterprises to directly handle the settlement of RMB in a cross-border trade via commercial banks.
Boost the financial industry
- Allow banks and foreign-funded institutions to establish joint ventures (JVs) financing companies.
- Enable overseas financial institutions to set up pension management companies.
- Support non-financial enterprise groups in setting up financial holding companies.
Integrated development of Yangtze River Delta
- Promote regional cooperation among financial institutions and improve financial services such as cross mobile payment and integrated credit system.
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