Law of the People's Republic of China on the Promotion of Small and Medium-sized Enterprises

(Adopted at the 28th Meeting of the Standing Committee of the Ninth National People's Congress of the People's Republic of China on June 29, 2002)

Table of Contents

Chapter 1 General Provisions

Chapter 2 Capital Support

Chapter 3 Support for Initiation of Business

Chapter 4 Technology Innovations

Chapter 5 Market Development

Chapter 6 Social Services

Chapter 7 Miscellaneous

Chapter 1 General Provisions

Article 1 This Law has been enacted in order to improve the business environment and healthy development of small and medium-sized enterprises, to create more employment opportunities in cities and villages, and to bring into play the important role of small and medium-sized enterprises in the national economy and social development.

Article 2 The “small and medium-sized enterprises” as used in this Law shall refer to the enterprises of various kinds of ownerships and in various kinds of forms that are established according to law within the People's Republic of China and are conducive to meeting the social needs and increasing the employment, that comply with the industrial policies of the State and whose scale of production and operation is small and medium-sized.

The standard for classifying small and medium-sized enterprises shall be formulated by the department of the State Council in charge of enterprises work according to the indexes such as the number of employees, the sales value and the total assets of the enterprises and in light of the characteristics of the industries, and the standard shall be subject to the approval of the State Council.

Article 3 The State shall apply the guidelines with respect to small and medium-sized enterprises such as actively supporting, strengthening the direction, improving the service, regulating according to law and guaranteeing their rights and interests, and thus create favorable environment for the establishment and development of small and medium-sized enterprises.

Article 4 The State Council shall be responsible for the formulation of policies on small and medium-sized enterprises and make overall arrangements for the development of small and medium-sized enterprises of the whole country.

The department of the State Council in charge of enterprises work shall organize the implementation of the policies, arrangements and planning of the State with respect to small and medium-sized enterprises, and render comprehensive coordination, direction and service to the small and medium-sized enterprises work of the whole country.

The relevant departments of the State Council shall, in accordance with the policies and arrangements of the State on small and medium-sized enterprises, render direction and service to the small and medium-sized enterprises work within their respective scope of duties.

The local people's governments at the level of county and above and the departments in charge of enterprises work and other relevant departments thereof shall direct and serve the small and medium-sized enterprises within their respective administrative areas.

Article 5 The department of the State Council in charge of enterprises work shall, in line with the industrial policies of the State and in light of the characteristics and development of small and medium-sized enterprises, determine the focus of support by formulating the industrial guiding catalogs for small and medium-sized enterprises and other forms to direct and encourage the development of small and medium-sized enterprises.

Article 6 The State shall protect the legitimate investment of small and medium-sized enterprises, their investors, and the legitimate proceeds obtained from the investment. No unit or individual may infringe upon the property and legitimate proceeds of small and medium-sized enterprises.

No unit may, in violation of laws and regulations, collect charges from or impose fines on small and medium-sized enterprises, or apportion obligations of property and money to small and medium-sized enterprises. Small and medium-sized enterprises shall have the right to refuse and to report and accuse the acts violating the provisions mentioned above.

Article 7 The administrative authorities shall safeguard the legitimate rights and interests of small and medium-sized enterprises, protect their right to participate in fair competition and fair trade according to law, and may not discriminate against them or impose unfair trade conditions on them.

Article 8 Small and medium-sized enterprises shall observe the laws and regulations of the State on labor safety, occupational health, social security, protection of resources and environment, quality, taxation and finance, etc. and shall operate and manage according to law, and may not infringe upon the legitimate rights and interests of the employees or damage the public interests.

Article 9 Small and medium-sized enterprises shall observe the professional ethics, stick to the principle of good faith, strive to improve the operation level and enhance the ability of self-development.

Chapter 2 Capital Support

Article 10 The central budget shall set up an entry of small and medium-sized enterprises, and arrange a special capital of support for the development of small and medium-sized enterprises.

The local people's governments shall provide financial support to small and medium-sized enterprises according to their actual situations.

Article 11 The special capital of support for the development of small and medium-sized enterprises of the State shall be used to promote the construction of the service system for and to carry out the support work for small and medium-sized enterprises, to supplement the development fund for small and medium-sized enterprises and to support other matters concerning the development of small and medium-sized enterprises.

Article 12 The State shall set up a development fund for small and medium-sized enterprises. The development fund for small and medium-sized enterprises shall be composed of the following financial resources:

1) the special capital of support for the development of small and medium-sized enterprises arranged by the central budget;

2) fund proceeds;

3) donations;

4) other financial resources.

The state shall, by means of taxation policies, encourage donations to the development fund for small and medium-sized enterprises.

Article 13 The development fund for small and medium-sized enterprises of the State shall be used in the following matters concerning the support for small and medium-sized enterprises:

1) assistance and service for the initiation of business;

2) support for establishment of the credit guarantee system for small and medium-sized enterprises;

3) support for technology innovations;

4) encouragement of specialized development and cooperation with large enterprises;

5) support for staff training and information consultancy by small and medium-sized enterprise service agencies;

6) support for development of international market by small and medium-sized enterprises;

7) support for clean production by small and medium-sized enterprises;

8) other matters.

The methods for the establishment, use and management of the development fund for small and medium-sized enterprises shall be formulated by the State Council separately.

Article 14 The People's Bank of China shall strengthen the direction of credit policies to improve the financing environment for small and medium-sized enterprises.

The People's Bank of China shall enhance the support given to small and medium-sized enterprises, and encourage the commercial banks to adjust the credit structure to give more credit support to small and medium-sized enterprises.

Article 15 The financial institutions shall provide financial support to small and medium-sized enterprises, make efforts to improve the financial service, change the service style, enhance the service sense and improve the service quality.

The commercial banks and credit cooperatives shall improve the credit management, expand the service area, develop the financial products suitable for small and medium-sized enterprises, adjust the credit structure and provide services to small and medium-sized enterprises in the aspects of credit, settlement, financial consultancy, investment management, etc.

The policy-based financial institutions of the State shall, within their respective scope of business, adopt various kinds of forms to provide services to small and medium-sized enterprises.

Article 16 The State shall take measures to expand the direct financing channels for small and medium-sized enterprises, actively guide small and medium-sized enterprises and enable them to create the conditions to make direct financing through various forms permitted by laws and regulations.

Article 17 The State shall encourage various kinds of venture capital institutions established, through taxation policy, to invest more capital in small and medium-sized enterprises.

Article 18 The State shall promote the construction of the credit system of small and medium-sized enterprises, establish the credit information collection and evaluation system, and realize the socialization of the inquiry, exchange and share of credit information of small and medium-sized enterprises.

Article 19 The people's governments at the level of county and above and the relevant departments shall promote and organize the establishment of the credit guarantee system of small and medium-sized enterprises, impulse the credit guarantee for small and medium-sized enterprises and create conditions for the financing of small and medium-sized enterprises.

The measures for the management of credit guarantee for small and medium-sized enterprises shall be formulated by the State Council separately.

Article 20 The State shall encourage various kinds of guarantee institutions to provide credit guarantee to small and medium-sized enterprises.

Article 21 The State shall encourage small and medium-sized enterprises to carry out various kinds of mutual financing guarantee.

Chapter 3 Support for Initiation of Business

Article 22 The relevant governmental departments shall actively create conditions, provide necessary and relevant information and consultation services, and, according to the needs of the development of small and medium-sized enterprises, rationally arrange necessary sites and facilities in the construction planning of cities and villages to support the initiation of business of small and medium-sized enterprises.

Where the unemployed or disabled initiate a small and medium-sized enterprise, the local governments shall actively render support and convenience, and enhance the direction.

The relevant governmental departments shall take measures to expand the channels to enable small and medium-sized enterprises to absorb graduates from the institutions of higher and medium learning.

Article 23 The State shall support and encourage the initiation and development of small and medium-sized enterprises in the aspect of relevant taxation policies.

Article 24 With respect to the small and medium-sized enterprises initiated by the unemployed, and those absorbing unemployed personnel the number of which meets the proportion as provided for by the State, those initiated in the areas of minor nationalities and depressed areas, those settling disabled personnel the number of which meets the proportion as provided for by the State, the State shall reduce or exempt their income tax and apply tax preferences to them.

Article 25 The local people's governments shall, according to the actual situations, provide policy consultation and information services in the aspects of industry and commerce, taxation, financing, labor and social security, etc. to the persons initiating business.

Article 26 The registration departments of enterprises shall, in accordance with the legal conditions and procedures, handle the registration procedures of the establishment of small and medium-sized enterprises, and improve the work efficiency to provide convenience for the registrants. And the departments may not set forth any pre-conditions for the registration of enterprises beyond the provisions of laws and regulations; may not take any charge beyond the charging items and standards as provided for by laws and regulations.

Article 27 The State shall encourage small and medium-sized enterprises to, in accordance with the policies of the State on utilization of foreign investment, introduce in foreign capital, advanced technology and management experience, and to launch Chinese-foreign equity joint ventures and Chinese-foreign cooperative joint ventures.

Article 28 The State shall encourage individuals or legal persons to participate in the initiation of small and medium-sized enterprises by investing industrial property or non-patented technology, etc. according to law.

Chapter 4 Technology Innovations

Article 29 The State shall formulate policies to encourage the small and medium-sized enterprises to, according to the market need, develop new products, adopt advanced technology, production technics and equipments, improve product quality and realize technological progress.

The technology innovation projects of small and medium-sized enterprises and the technology reform projects designed for the projects of large enterprises may enjoy the policies of discount in the interest on loans.

Article 30 The relevant governmental departments shall provide policy support in the aspects of planning, land use and finance, etc., promote the establishment of various kinds of technological service institutions, establish productivity promotion centers and technology enterprises incubation bases, provide the services such as technology information, technology consultation and technology transfer for small and medium-sized enterprises, and provide services for the product and technology development of small and medium-sized enterprises to promote the transformation of technological achievements and realize the upgrading of the technology and products.

Article 31 The State shall encourage small and medium-sized enterprises to conduct technology cooperation, development and exchange with research institutions and institutions of higher and medium learning to promote the industrialization of technology achievements, and shall actively develop technology-oriented small and medium-sized enterprises.

Chapter 5 Market Development

Article 32 The State shall encourage and support large enterprises and small and medium-sized enterprises to establish cooperative relations based on allocation of resources by market in the aspects of stable supply of raw materials, production, sales, technology development and technology reform, etc., to drive and promote the development of small and medium-sized enterprises.

Article 33 The State shall guide, promote and regulate the restructuring of assets and optimization of resources by small and medium-sized enterprises through the forms of merger and acquisition, etc.

Article 34 Government procurement shall be arranged to purchase commodities or services from small and medium-sized enterprises by priority.

Article 35 The relevant governmental departments and institutions shall provide direction and assistance to small and medium-sized enterprises, to promote their exports and foreign economic and technological cooperation and exchange.

The relevant policy-based financial institutions of the State shall, by carrying on the businesses of import and export credit and export credit insurance, etc. to support small and medium-sized enterprises to develop foreign markets.

Article 36 The State shall formulate policies to encourage qualified small and medium-sized enterprises to make investments abroad, to participate in international trade and to develop international market.

Article 37 The State shall encourage service institutions for small and medium-sized enterprises to hold product exhibitions and fairs, and information consultations.

Chapter 6 Social Services

Article 38 The State shall encourage all circles of the society to establish and improve the service system for small and medium-sized enterprises to provide services to them.

Article 39 The small and medium-sized enterprise service institutions established with the support of the government according to the actual needs shall provide services to small and medium-sized enterprises.

The service institutions for small and medium-sized enterprises shall fully utilize the advanced technological means as computer networks, etc. to gradually establish and improve an information service system open to the whole society.

The small and medium-sized enterprise service enterprises shall contact and guide various kinds of public intermediary institutions to provide services to small and medium-sized enterprises.

Article 40 The State shall encourage various kinds of public intermediary institutions to provide for the small and medium-sized enterprises with business initiation assistance, enterprise clinic, information consultation, marketing, investment and financing, loan guarantee, title transaction, technology support, talents introduction, staff training, foreign cooperation, exhibitions and fairs, legal consultations and other services.

Article 41 The State encourages the relevant agencies and institutions of higher leaning to train the personnel of small and medium-sized enterprises in the aspects of operation and management, production and technology, in order to advance the level of marketing, management and technology of small and medium-sized enterprises.

Article 42 Industrial self-regulatory organizations shall actively serve small and medium-sized enterprises.

Article 43 Self-regulatory organizations of self discipline and self service for small and medium-sized enterprises shall safeguard the legitimate rights and interests of small and medium-sized enterprise, to make known the suggestions and requirements of them and to provide services for their exploration of markets and improvement of operation and management capacity.

Chapter 7 Miscellaneous

Article 44 The provinces, autonomous regions and municipalities directly under the Central Government shall, according to the situation of the small and medium-sized enterprise of their respective areas, formulate the relevant implementation measures.

Article 45 This Law shall come into force on Jan.1, 2003.