China Releases Administrative Measures on SME Development Fund

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Jul. 2 – China’s Ministry of Finance released the “Administrative Measures on the Development Fund for Small and Medium-Sized Enterprises (SMEs) Engaged in Industries with Local Characteristics (hereinafter referred to as ‘Measures’)” on April 27, which explicitly supports SMEs in an effort to cultivate their own brands. Detailed information can be found below.

For the purpose of the Measures, several terms have been defined as below:

“The development fund for SMEs engaged in industries with local characteristics” refers to the fund allocated from the central financial budget that is specially used for supporting the development of SMEs in the industry clusters with local characteristics (hereinafter referred to as the ‘Fund’).

“Industry clusters with local characteristics” refers to production and operational groups formed based on the regional and resource advantages with a focus on the production, sale and services of products with local characteristics.

“Guiding Fund” refers to the venture capital guiding fund established by local governments for the purpose of promoting the development of SMEs in industry clusters with local characteristics.

Supporting Scope
The Fund shall be utilized to achieve the following purposes:

  • To promote the technological innovation of SMEs
  • To promote the energy-saving and emission reduction by SMEs
  • To strengthen the specialized cooperation between SMEs and backbone enterprises
  • To promote the industrial upgrading of SMEs
  • To support the brand-building of SMEs
  • To improve the service environment for SMEs
  • To support the establishment of the Guiding Fund for SMEs

Supporting Methods

The Fund shall provide SMEs with the following three support methods:

  • Financial aid;
  • Subsidies for loan interest; and
  • Capital investment.

An enterprise or entity can only apply for one of the above-mentioned supporting methods each year. Moreover, capital investment is applicable to projects supported by the Guiding Fund, while financial aid and subsidies for loan interest are applicable to other projects.

The Measures provide that financial aid provided to a single project shall not exceed RMB3 million, while the amount of capital investment provided by the Fund to a project shall not exceed 30 percent of the total amount of the Guiding Fund.

The amount of the subsidy for loan interest provided by the Fund shall be determined according to the following two factors:

  • The amount of the loan granted to the project; and
  • The benchmark loan interest rate published by the People’s Bank of China for the corresponding period.

The term of the subsidy for loan interest provided to a project shall not exceed two years, with the subsidy rate capped at the benchmark loan interest rate for the corresponding period; besides, the amount of such subsidy for a single project cannot exceed RMB3 million.

Eligibility Requirements
To apply for the Fund, an entity shall meet the following requirements:

  • It is located in an industry cluster with local characteristics;
  • It has an independent legal personality;
  • It has a sound financial management system;
  • Its accounting information is accurate and complete;
  • It has good taxation credit and bank credit; and
  • Its declared projects fall under the supporting scope of the Measures.

Application Materials
Application materials for the Fund shall be submitted to the competent financial department and generally include the following:

  • Written application for the Fund;
  • Project feasibility report;
  • Information on production and business operations or information on business development;
  • Financial report audited by certified public accountants;
  • Duplicate of business license and articles of association of the entity (copies thereof); and
  • Other required materials.

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