MIIT Releases New Industry Standards for SMEs
As part of the ongoing effort to promote development and finance of small- and medium-sized enterprises (SMEs) in the country, the Ministry of Industry and Information Technology (MIIT) has recently published a new set of guidelines for classifying SMEs. For the first time ever, the MIIT has included definitions for microenterprises in the classification standards, signaling increased policy support. In addition, the new classification standards will include other acute departures from the previous standards issued in 2003.
These guidelines are of critical importance for small enterprises, particularly since the guidelines now call for a new classification for microenterprises (微型企业). This new classification will draw greater attention to the credit situation for these businesses, which will be very valuable to their continued development. Also, individual and household businesses (or getihu, 个体户) for the first time are eligible to be formally included in the category of SMEs under these guidelines. Prior to the publication of these new industry standards, they were regulated as their own category, under a separate law.
In addition, the guidelines allow for some variances in definition across industries. Under the former regulations, there was a maximum ‘cut-off point’ for the size of an SME, regardless of its industrial sector: 2,000 employees, RMB 300 million in revenues and RMB 400 million in total assets. The new regulations will now consider different factors for each industrial sector when determining SME status of a firm. For example, companies working in the commercial and transportation sectors will be evaluated based on their revenues and number of employees; whereas companies working in services and entertainment will be evaluated based on number of employees alone. Also, the ‘cut-off points’ themselves will vary from sector to sector: a construction firm will be considered a ‘microenterprise’ if its annual revenue is less than RMB 300,000; whereas a firm working in agriculture, forestry, herding or fishing will be considered a ‘microenterprise’ if its annual revenue is less than RMB 500,000. The new guidelines now actually delineate and cover most sectors of the Chinese economy: 88.42% of large industries, 91.41% of medium industries and 94.09% of small industries.
This new regulation signals a growing awareness of the importance of SMEs to China’s development. At present, SMEs provide 50% of the nation’s tax revenues, account for 60% of its total productive output and employ 80% of its workforce (micro-enterprises alone accounting for 38.7% of all workers in China!). These new standards demonstrate China’s growing attention and emphasis on the development of SMEs. PlaNet Finance consultants believe that, through the government’s attention to these issues, SME financing will receive greater prominence and our knowledge of the situation of SMEs will increase dramatically.
For a full list of classification standards across industries, please see the source link below.
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