On February 18, 2020, China’s Premier Li Keqiang presided an executive meeting of the State Council to implement policy initiatives for businesses. In the meeting, Li stressed the importance of policies that can support enterprises in surviving the coronavirus crisis. As small and medium-sized enterprises (SMEs) account for a huge part of the Chinese GDP, they play a key role in the country’s employment and its stability. Thus, Chinese officials saw the need to tackle the risk of the COVID-19 epidemic to SMEs.
Read our previous article on COVID-19 Update: China Eases Business Difficulties
As part of the efforts to assist companies during the epidemic, the Chinese government announced a reduction of social contributions by various enterprises. This includes social insurance costs and housing funds contributions. Keep reading!
Reduction of social insurance costs
The State Council policy prioritizes the reduction or exemption of social insurance fees that enterprises pay for their employees. This includes the three kinds of social insurances – pension, unemployment, and work-related injuries. It will supposedly minimize the impact of the novel coronavirus on small and medium-sized companies.
The pension contributions and insurance fees cut this year is worth RMB 500 billion (USD 71.27 billion). This amount of money “freed” by the government will help companies to continue their projects and not delay them. According to the report, the reduced fees have exceeded the last year’s cost which was RMB 400 billion worth.
The government will exempt the corporate social insurance premiums for SMEs from February 2020 to June 2020. On the other hand, larger enterprises will pay half of the contribution to social insurance from February to April 2020. Both small and large enterprises located in Hubei province, however, will not pay for social insurance from February to June 2020. Meanwhile, from February to December 2020, the social insurance medical rate for the employer’s part (including maternity insurance) will reduce by 0.5%.
Besides the preferential policy for social security, the government will also defer payments for housing provident funds. Companies can delay housing funds payments to keep working capital as high as possible. Through this, employees can minimize the risk of overdue payments into their housing funds. But at the same time, they will still receive their housing fund as usual with no changes in related loans.
The table below shows a summary of the reduction benefits for social insurance for only the employer’s part and deferred payments for housing funds during the coronavirus outbreak.
Small and medium enterprise criteria
The new social insurance policy will need further clarification in terms of which businesses fall into the SME category. Nevertheless, enterprises can refer to the Notice on Printing and Distributing the Provisions for Standardizing of SMEs (MIIT  No. 300). The said notice shows the details for specific industries. It takes into consideration the number of employees, total revenue or total assets of the enterprises.