To diminish the spread of COVID-19 pandemic, almost all policymakers around

the world made a trade-off response, the Chinese government is not an exception one.
They, both central and local, have been rolling out supporting policies to shield the
economy on many different objects. Subsequent treatments have been stringently
arranged and highly aimed to endeavour to shore up the business, which have been
affected to be disruptive. Through many policies adopted, authorities seem to pay the
most special attention to small and medium-sized enterprises (SMEs). Together, the
economy is hoped to return to normalcy gradually .

Financial Support

China's GDP growth rate plummeted by 6.8% in the first quarter. Economic
activity gradually returned to normal in the second quarter, although there was a supply
and demand problem. Positive policies must be implemented effectively in order to
ensure that the economy runs smoothly and fulfill the expected targets for the year. The
1 trillion yuan anti-epidemic special treasury bond has been issued consecutively since
June 18 and is likely to be completed before the end of July. The "special national debt"
utilized to combat the disease was called "national debt," and it was primarily used to
fund local infrastructure projects. On June 23, the Ministry of Finance announced its
intention to use special treasury bonds for speculative financing. Special treasury bonds
will be used primarily to fund infrastructure projects such as public health, food security,
and emergency supplies, as well as modernize and convert industrial chains and
construct transportation infrastructure. Payments for rent reduction subsidies, principal
corporate loan discounts, corporate guarantee loan interest discounts, business support
grants and stable jobs, basic living allowances for people in need, and other expenses
related to the fight against the epidemic can also be made with special Treasury bonds.

MOF issued a "Urgent Circular on Strengthening Capital Support to Key

Enterprises in the Fight Against Novel Coronavirus Pneumonia" on February 7, 2020.
As the primary guarantee for epidemic prevention and control, financial discounts were
encouraged for loans to businesses. On the basis of the People's Bank of China's
special on-lending to encourage financial institutions that provide loans at favorable
interest rates. The People's Bank received a 50% discount on the on-lending interest
rate from the central government, and the loan length could not exceed one year.
Support for discounting interest rates on secured loans to entrepreneurs for those
affected by the epidemic. Borrowers suffering from new coronavirus pneumonia can
request to the lending bank for a repayment extension on individual business secured
loans that have already been issued. On the other hand, interest rates for secured loans
extended or overdue for entrepreneurship were not discounted by the finance
department. "State Council Pledges Greater Inclusive Financial Support to SMEs and
Micro Firms," according to the State Council. The 1 ​trillion RMB (US$ 140 billion) in
re-lending and re-discount quotas for SMEs and micro banks. To achieve the "volume
rise and price reduction" of loans for small and medium-sized banks, the required
reserve ratio cutting strategy was targeted. Nation banks must make profit distributions
to ensure the coverage of loans for SMEs was expanded. Outbreaks wreaked havoc on
agriculture, foreign trade, and industries. The 300 billion RMB (US$42.3 billion) in
financial bonds issued by financial institutions will be used for loans aimed solely at
SMEs. The corporate's net financing of credit bonds support grew by 1 trillion RMB
over the previous year, according to the meeting, to widen low-cost finance channels for
SMEs. Furthermore, SMEs have temporarily lost their income streams as a result of the
epidemic, local finance agencies at all levels collaborate with associated parties to
prioritize support when obtaining business security loans. In areas hit-hard by the
epidemic, the National Financial Guarantee Fund cut the re-guarantee price in half for
government facing guarantee and re-guarantee institutions. Financial guarantee
companies provided financial guarantees and a reasonable prolongation of the recovery
period to SMEs who were unable to return their obligations. According to the
organization's regulations, businesses must meet their compensation commitments on
schedule.
Additionally, to reduce pressure on businesses, especially SMEs, of the burden
of paying principal and interest throughout the year. The State Council continued to
extend the deferred payment until December 31, 2020. The financial institution
approved for deferred principal repayment on the basis of the enterprise's request for
approval of the deferred repayment through loan extension or loan renewal. SMEs have
a strong probability of developing aspects, the financial institutions can negotiate with
the enterprise to arrange a certain delayed interest payment period based on the actual
situation of the enterprise. Without penalty interest, the due date was extended until
December 31, 2020. The government established a "green channel" for epidemic
prevention and control in a bank account. It was required to actively open a "green
channel." to simplify the loan approval procedure, accurately authorize approvals, and
get loans as quickly as possible. Reducing and exempting banking and financial
institutions for remittance linked to epidemic prevention and control using the People's
Bank of China's payment system. Incentives for financial and banking services
institutions actively responded to SMEs' financing demands.
Commercial banks and financial institutions are also businesses working for
revenue. They can not just keep lending their money without any support from the
government. To use the quantity-based policy tool effectively, the authorities adjusted
reserve requirement ratio (RRR) which would have a butterfly effect on the interest rate
channel. Therefore, the People’s Bank of China (PBC) cut RRR a few times
continuously in a short period of time. The first time was 0.5% for all financial institutions
on 6th Jan[ ]. The second time, RRR was cut from 0.5% to 1% for financial institutions
meeting the financial criteria ( The required criteria was about the ability to lend to
households, SMEs, sole trader loans and so on)[ ]. And an additional 1% for joint-stock
commercial banks[ ]. That cut was executed on 10th March. There were two next cuts
on 15th April and May with the same rate 0.5% for small financial institutions[ ] - the
mainly credit source that SMEs accessed. Moreover, to insure the lending entities the
PBC also announced that 1% of principal of SMEs would be paid by the PBC[ ]. And
40% loans during 31th March - 31 Dec 2020 sent to SMEs would be guaranteed by
PBC also[ ].

Thanks to those efforts, the loans to SMEs went up to 25,4% higher than the
growth rate of general loans[ ]. The Chinese government aided SMEs so much
powerfully because SMEs are the element that can cause enormous unemployment
rates. In 2018, SMEs provided 79.4% jobs in the economy[ ]. Thus to protect the
economy against negative effects of the outbreak, they had to save SMEs at their best

Labor Support

The General Office, the Ministry of Human Resources and Social Security
(MHRSS) has released “Notice on Properly Handling Labor Relation Issues during the
Period for Prevention and Control of the Novel Coronavirus-infected Pneumonia
Epidemic”on January 24, 2020. The major principles were for employees of enterprises
who were unable to work or suspected patients who had been in close contact with
coronavirus, as well as the government-mandated isolation procedures. Articles 40 and
41 of the Law on Labor Contracts required employers to pay employees measured
remuneration for work done during this time and not to terminate labor contracts with
employees. Enterprises suffering operational hardship can be stabilized by adopting
strategies such as remuneration adjustment, reducing working hours, and avoiding or
reducing layoffs. According to policy, eligible businesses can receive job stability
subsidies. In case the enterprise suspended production within a wage payment cycle,
the enterprise shall pay the employee's salary in accordance with the labor contract's
rules. If the delay lasted more than one salary payment cycle and the employees
provide normal labor, the enterprise's salary to the employee could not be lower than
the local minimum wage standard. On February 5, 2020, they notified “Employment
Work During the Epidemic” which enhanced the payout of unemployment insurance
benefits to enterprises to avoid layoffs and alleviate the strain on enterprises from the
costs of retaining employees Enterprises hold free online job training, manage proper
working hours as well as being encouraged to pay wages based on negotiation before
resuming production. This program also provided fully secured loans for business
start-ups or individuals starting a business can apply for a repayment extension if they
have been infected with the coronavirus. Individuals and SMEs with no income because
of the epidemic outbreak will be given priority for loans when applying for loans.

Social support

Lockdown of cities put thousands of stranded people in difficult situations. Along

with the closure has contributed to increasing unemployment pressure on the labor
market. Loss of income and rising commodity costs have led low-income and
impoverished families to consume less, putting many on the verge of poverty.
The General Office and Ministry of Human Resources and Social Security
(MHRSS) has issued “Notice on Deferring Social Insurance Payment and Promoting
Online Services”. Insurance agencies approved overdue insurance registration and for
those who did not submit the supplementary declaration for retirees after being
reviewed would have their pensions re-issued from next month. In 2020, the time limit
for one-time payback or regular repayment of social insurance premiums was relaxed
for flexible employees and urban and rural residents. Additionally, those who fail to
complete the insurance premiums in time are allowed to reissue it after the epidemic is
resolved, but they will be marked in the system. Late payment has no effect on the
insured persons' personal rights and interests records, and replacement procedures
should be completed within three months after the outbreak. The notice indicated that
social security agencies should strive to provide "no-face" services to reduce on-site
interaction and reduce the risk of cross-contamination. It was necessary to combine with
the construction of a unified nation social insurance public service online platform
"social insurance on the palm" to facilitate businesses without leaving their homes. On
February 20,2020, they notified “The Phased Reduction of Social Insurance Premiums
for Enterprises”. This new policy effectively exempted or reduced all employers' social
insurance burdens over the next few months for three of the five core social insurance
categories (pension, health, unemployment employment, work-related injury and
maternity insurance), and allows both employers and employees to defer payments
made to housing provident funds. This policy has a financial impact on SMEs across the
country, allowing them to save between 10 to 15% on compensation. During the period
of February to June 2020, especially SMEs in provinces, except Hubei will be excused
from paying premiums. For large companies, the payment of pension, unemployment
and work injury insurances will be halved from February to April 2020. In Hubei, all
firms in Hubei, regardless of size, will be exempt from paying premiums for above three
social insurance payments from February to June 2020. Before the end of June,
enterprises can apply for a postponement of the payment of the housing provident fund.
The announcement also stated that the pension insurance fund for corporate
employees will be increased to 4% in 2020 to further strengthen support for
disadvantaged areas. According to preliminary calculations, corporations might save
roughly 500 billion yuan in fees as a result of this legislation. During this period, there
will be no overdue processing of provident fund loans that employees are unable to
repay owing to the pandemic's impact during this time. Companies in hard-hit regions
can negotiate with employees to halt payments to the housing assistance fund or adjust
the reasonable contribution rate.

China also responded quickly to the pandemic and mitigated its impact on
households, workers and enterprises. The emergency assistance programs were
utilized: Emergency aid was provided to people who were stranded. Strengthen social
support for the poor, low-income families and the unemployed. Supporting people
returning to the workplace "point to point" chartered transportation services and online
training programs and streamlining the application process for social assistance and
unemployment benefits. Across the country, an emergency assistance program
implemented cash or temporary accommodation programs for stranded people,
including migrant workers. In Hubei, a number of temporary resettlement sites have
been established for stranded people who have difficulty in accommodation provided a
basic living security allowance of 300 yuan per day. Hubei had a total of 69 resettlement
sites for 6,000 people, supporting more than 13,000 people with an amount of up to 30
million yuan in temporary relief. China had a social protection system called “Dibao”(
China’s minimum living standard guarantee, social safety-net program) but in which
only a small percentage of households were covered by it. Dibao ensured a minimal
quality of life by giving financial transfers to individual households to help them earn
more money. In 2019, the overall number of beneficiaries of social assistance programs
amounted to 56.7 million people, accounting for 4.1 percent of the entire population.
The total amount of planned transfers from the central government between January
and June 2020 will amount to RMB 156 billion ($22.3 billion). Benefiting approximately
39 million poor individuals and vulnerable households. Most of the rural migrant laborers
returned to their hometowns to celebrate the Chinese Spring Festival at the start of the
disease. The closure forced millions of rural migrant workers to remain in the
countryside and made it difficult to return to the cities where they worked. As a type of
public employment service, "point to point" is used to assist migratory employees in
returning to work. Priority is given to migrant workers with the same travel time and
similar working places with a certain number of people. Businesses need to establish
personal health records for migrant workers to ensure that workers meet criteria such as
getting enough immunizations to avert the pandemic before returning to work with
adequate protection. At the same time, the government has also launched the
unemployment insurance funds to facilitate upskilling through online job training and
recruitment services for local unemployed and migrant workers. Vocational training,
skills evaluation, and start-up were among the activities.
Foreign-invested enterprises

China is enacting stimulus measures to fortify the confidence of the foreign

business community through launching policies toward the concern of foreign-invested
enterprises, ranging from issuing low-cost loans to accelerating major foreign
investment projects.

On Feb 10 2020, the Ministry of Commerce (COMFOM) launched the Circular on

Strengthening Services to Foreign Enterprises and Attracting Investments During the
Coronavirus Epidemic, which marked out a diversity of assignments for local authorities
in assisting foreign-invested enterprises [i]. Due to the influences of COVID-19
pandemic, there were difficulties that the foreign firms faced when they resumed their
business activities such as labor shortages or other problems as a result of the
outbreak. And this circular directed the local governments to shore up those enterprises
in solving those problems. Moreover, It also mentioned assisting in other issues and
complaints of business,even outside the business, including help for foreign employees
and their families grounded in China. COVID-19 pandemic was not totally under control
so beyond helping the firms with resumption of business, the Ministry of Commerce also
guided the locals to prepare essential protectives and medical elements in case of
outbreak of disease such as protective clothing, masks, goggles and gloves. Local
governments were commanded to keep their eyes on major investment projects closely.
Therefore they can assist foreign investors resolve problems as soon as possible,
especially disruptions to construction.More than one week later, Feb 18, COMFOM
released an additional circular with 20 points on ways to spur foreign trade and
investment at local level [i]. Those measures were almost similar to the previous one;
some new instructions were added. At that time, local authorities were instructed to
cooperate with insurance agencies to increase the support for firms impacted by the
coronavirus, such as unpredictable order cancellation. Additionally, the circular also
guided the attention on developing e-commercial service for foreign businesses.
Because shopping in crowded spaces during the outbreak was not proper anymore,
foreign trade needed to be helped with adaptation to e-commerce.

To sum up, the measures may be vague or redundant but two circulars
expressed that the foreign businesses were a vital playrole in the Chinese government’s
eyes. They heard and were taken seriously in re-opening activities. On the other hand, it
restored the confidence of foreign business community in the meantime.
Tax and fee policies

Businesses, especially small- and micro-sized enterprises, seemed to be the key

element in rescuing the economy from the coronavirus effects of the Chinese
government. Tax and fee were the productive and multi-functional tools that they used.

Tax policies in support of prevention and control of the epidemic situation caused
by novel coronavirus pneumonia was issued by the Ministry of Finance, State Taxation
Administration [ii]. This announcement was related mainly to purchase for prevention
and control of the outbreak. Enterprises can count the cost of the equipment into the
cost and expenses for the current period and were deductible before calculation of
enterprise income tax. This released the employers from hesitation in protecting the
employees health and their business activities which contributed to the social stability
partly. Because after all the aim of doing business is profit, if purchasing equipment
makes them suffer from the loss, they would rather drop providing goods and services.
Besides, the firms which manufacture key supplies for prevention and control of the
pandemic may be reimbursed the incremental tax credits of the value-added tax (VAT).
The profit earned from transportation of those pandemic-related supplies and express
delivery services for daily necessities of residents would be exempted from VAT.
Moreover the government also backed some industries: transportation, centering,
accommodation and tourism. The period of carrying the losses incurred in 2020 was
stretched out up to 8 years, instead of the previous five years.

Beyond that, the tax policies again were utilized as a measure to aid the citizens
in the outbreak. Following the Announcement No.9, the enterprises or individuals
donating cash, articles or self-produced goods to hospitals, non-profit organizations or
state organs would gain the benefits from reducing or exempting some kinds of taxes as
long as they can provide the eligible donation receipts [ii]. This was the direct and quick
way to assist the daily life of citizens facing troubles. It saved a lot of time in aiding
instead of collecting money from taxpayers at the end of the current tax period and
disbursement with many administrative procedures later.

In 2020, the Vietnamese government successfully controlled and stabilized the

country against the spread-out of the pandemic. And that increased the competitive
advantages in the eyes of foreign investors. Therefore the Chinese authorities had to
take action to make Guangxi and Yunnan more beneficial for manufacturing costs.
China’s State Council went for extending preferential corporate income tax (CIT)
policies to attract massive development[]. Normally, China’s standard CIT is 25% [iii]
and that of Vietnam is 20% [iv]. On April 14, the Ministry of Finance, State Taxation
Administration released the announcement . Following it , enterprises would pay a lower
CIT rate of 15% if they invest in encouraged industries in Western Region from Jan 1st
2021 to the end of 2030 [v]. This offer is also valid to the foreign-invested businesses,
they can get the same tax priority, no discrimination.

After discontinuity, businesses encountered difficulties and the government

enacted practical treatments to create initial traction and maintain momentum in
resumption. On June 17, Premier Li Keqiang announced a series of fee reductions for
enterprises in an executive meeting of the state council [vi]. Following it, electricity fees,
port cost, highway tolls, telecommunication rate and oil liability insurance would be
reduced or waived in 2020. All fee reductions would help companies save around $44
billions predictably. Besides, the announcement also stimulated the financial institutions
to decline the bank charges. Obviously, this announcement is mainly targeted to SMEs
again.

. To shore up the economy and society during the pandemic, the tax system was
interfered seriously. Seemingly, tax reduction was productive but tax and fee are the
main income of any government, the shortage would show up in the near future.

Foreign trade

The US and China have been at odds with each other in a couple years which
led to tariffs escalation and negotiation. On Jan 15, 2020, they signed the Phrase One
economic and trade agreement [vii]. Following the “Chinese purchase” chapter, Beijing
would purchase four specified product categories: manufacturing, agriculture, energy
and services. The total value of them would be $77 billion in 2020 and up to $123 billion
in 2021 [viii]. With this agreement, the market would not play a role that was not as
decisive as before. Trading and purchasing targets would be under control of the
government partly. And both sides partially decreased tariffs []. Committing to buying
defined US products with huge value would affect imports from other countries and
other US commodities. This agreement would cause enormous influences on foreign
trade in China, it is quite important. However, its primary objective was not for dealing
with the outbreak so further discussion would not be executed.

Covid-19 has been spread out unprecedentedly which has been impacting global
trade. Being a huge exporting country, China early released a series of trading
measures to minimize the disruption of trade flows. And the target of the government's
plan was cross-border trade facilitation. To suit that objective, customs procedures were
simplified, the port charges, inspection and quarantine were also reduced. In detail, they
firstly speeded up the release of goods. A few things applied were priority roads for
transportation, on-board inspections or door-to-door inspections, pick-up service for
medicines and medical devices. Furthermore, the new ways were used to drop the time
spent on customs procedures. They were successful when it cost the relief merchadises
only forty-five minutes on that. Secondly, enhancing access to information took place.
The importers would be guided online to complete the essential documents which
fastened the supply source and prevented the spread-out of virus. Besides, the
electronic documents can be approved by customs. If the paper documents were
needed for serving storage and re-checking, the enterprises could submit it later. And
the program called “ Belt and Road Initiative” was executed to aid businesses to
exit/enter commodities. Thanks to those treatments supporting the trading and
preventing illegal trading for the advantages of the situation were both nailed. Finally,
China suggested international coordination from other countries to mitigate the negative
impacts in international trade. They recommended data exchange and information
sharing about customs.

Being the epicentre of disease at the beginning, China’s foreign trade volume
increased by 1.9% in the comparison with the previous year and reached RMB32.16
billion (Chinese currency) [ ]. To sum up, the government launched effective measures
to fight against the Covid-19 and prevent supply chain disruption.

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[iii] Vietnam - Corporate - Taxes on corporate income. (2021). Retrieved from Worldwide
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[iv] China - Corporate - Taxes on corporate income. (2021). Retrieved from Worldwide
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[vi] Dorcas Wong (2020), China Announces More Fee Cuts, Companies Expected to
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[vii] Dorcas Wong, Melissa Cyrill, and Zoey Zhang (2020), US, China Sign Phase One
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[viii] Trade policy reform (2020) retrieved from Retrieved from The China Dashboard
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[viii]