The government will help small and medium-sized enterprises survive the financial crisis by offering tax reduction policies and financial opportunities, officials from Fujian said yesterday at the provincial political consultative conference.

Banks and other financial institutions should set up special departments to help SMEs to get loans and give them favorable policies, Li Chuan, vice-governor of the Fujian Province, said.

SMEs are the major part of the economy in Fujian. They contributed 84.6 percent in the first three quarters of last year, according to official statistics. They are also the major employers in the province.

But they are particularly vulnerable as the impact of the global financial crisis spreads and demand in China's major export markets weakens.

Financial institutions that favor big companies are reluctant to lend money to SMEs.

Many SMEs have closed in the Yangtze River Delta and Pearl River Delta, but most in Fujian have survived.

Local authorities said they will work harder to help SMEs this year.

A local branch of Bank of China has launched a new business model to help small firms get loans faster and easier.

Chen Shi, president of the Fujian branch, said last year that the bank gave 2 billion yuan ($290 million) of credit to SMEs, but will increase that to 3 billion yuan this year.

Traditionally, requirements for SMEs to get loans are strict, and they can use only limited resources.

However, under the new model, SMEs can use other resources, including raw materials, orders from clients and their track records to secure loans within five days of applying for them.

The government will also reduce taxes for SMEs.

The rate for firms with annual revenue of 300,000 yuan will be 20 percent, while the standard income tax rate is 25 percent, according to an official from local tax authority.

According to the new system of value added tax, which started on Jan 1, firms will also be able to pay less tax if they buy equipment to upgrade their technology.

The government also encourages local firms to finance for their businesses through other channels.

For instance, it encourages industry associations to set up trust agencies, so that firms can help support each other.

(China Daily January 14, 2009)