A way out

Tax cuts and fee reductions should be furthered. Favorable policies to this end had been focusing on micro, small and medium-sized enterprises before the COVID-19 pandemic broke out. Since 2020, apart from previous measures, more policies tending to focus on smaller firms have been put forward, such as allowing social security deferrals for smaller firms seriously affected by the pandemic and encouraging reduction or exemption of their operating rents. The supportive attitude of government departments toward private enterprises has been encouraging, especially when the nation is facing weakening expectations for the private sector, and effective policies are very much needed. However, some policies like those improving the business environment feature long-term institutionalized implementation and will take a certain amount of time to achieve results.

Looking ahead, the government should continue to reduce the tax burden and optimize the tax burden structure. The tax rebate policy has proved effective when looking at economic performance, but there is still room for continuous efforts. Local governments can provide more targeted tax support for their respective core industries in accordance with regional industrial advantages. Implementation of tax rebates, tax reductions, tax breaks and other policies should be monitored at every level, kept transparent and fully carried out to effectively help enterprises achieve profit growth, which ultimately will drive the development of the overall economy.

In terms of financing, multichannel financing should be further enhanced to support the development of private enterprises. Some such cases have produced positive results. In terms of equity financing, the establishment and opening of the Beijing Stock Exchange last year was a major move to facilitate a financial support system for private enterprises. As of Nov 14, the BSE had 123 listed companies, of which private enterprises accounted for 86 percent. In terms of bond financing, the China Securities Regulatory Commission and the National Development and Reform Commission have issued measures to promote the bond market to better support the reform and development of private enterprises. According to the National Association of Financial Market Institutional Investors, in the first three quarters, private enterprises issued bonds worth about 428 billion yuan, an increase of 14 percent year-on-year, and the net financing amount was about 29 billion yuan, an increase of about 37 billion yuan year-on-year.

In terms of other financing support, it is recommended that the People's Bank of China — the central bank — and policy banks put forth more policy-based preferential loans to provide interest-free loans to smaller firms, which are in need of bailouts to help them tide over difficult times.

Apart from the above efforts, favorable measures for private enterprises such as widening investment access as well as improving market regulation and supervision will work to help shore up the sector amid economic headwinds. But all in all, the task of overcoming difficulties still relies heavily on the efforts for individual enterprises. Deepening innovation in pursuit of higher quality should be the core solution at any time.

According to a survey by the federation, even among the top 500 private enterprises, it can be seen that research and development expenses are still mainly self-financed, and the proportion of external funding support is low. Policy support to this end can be put forward to encourage R&D help for private enterprises and attract or cultivate more high-tech talent at home and abroad to directly promote R&D progress and business operations.

The views don't necessarily reflect those of China Daily.

The writer is a chief economist at Zhongtai Securities. This article is based on an op-ed by the writer for the China Chief Economist Forum, a think tank.