Law of the People's Republic of China on the Promotion of Small and Medium-sized Enterprises (Revised in 2017)

Order of the President of the People's Republic of China No.74

September 1, 2017

The Law of the People's Republic of China on the Promotion of Small and Medium-sized Enterprises, which was revised and adopted at the 29th Session of the Standing Committee of the 12th National People's Congress of the People's Republic of China on September 1, 2017, is hereby issued for implementation as of January 1, 2018.

Xi Jinping, president of the People's Republic of China

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

(Adopted at the 28th Session of the Standing Committee of the Ninth National People's Congress on June 29, 2002, and revised at the 29th Session of the Standing Committee of the 12th National People's Congress on September 1, 2017)

Contents
Chapter I General Provisions
Chapter II Financial and Tax Support
Chapter III Financing Promotion
Chapter IV Support for Entrepreneurship
Chapter V Innovation Support
Chapter VI Market Development
Chapter VII Service Measures
Chapter VIII Protection of Rights and Interests
Chapter IX Supervision and Inspection
Chapter X Supplementary Provisions

Chapter I General Provisions

Article 1 In order to improve the business environment for small and medium-sized enterprises (the "SMEs"), ensure their fair participation in market competition, maintain their legitimate rights and interests, support their entrepreneurship and innovation, promote their healthy development, create more employment opportunities in cities and villages, and bring into full play the important role of SMEs in the national economy and social development, the Law of the People's Republic of China on the Promotion of Small and Medium-sized Enterprises (this "law") is hereby formulated.

Article 2 The "small and medium-sized enterprises" mentioned herein refer to enterprises that are established according to the law within the territory of the People's Republic of China with a relatively small scale of staff and operation, including medium-sized, small and micro enterprises.
The standard for classifying small, medium-sized and micro enterprises shall be formulated by the department of the State Council in charge of comprehensive coordination of the promotion of SMEs together with the relevant departments under the State Council according to the indexes such as the number of employees, the business revenue 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 treat the promotion of the development of SMEs as a long-term development strategy, persist in the equality of all kinds of rights, opportunities and rules, and apply the guidelines with respect to SMEs and especially small and micro enterprises of "actively supporting, strengthening guidance, improving service, regulating according to the law and guaranteeing their rights and interests to create a favorable environment for the establishment and development of SMEs".

Article 4 SMEs shall operate according to the law and abide by the national laws and regulations on labor employment, safe production, occupational hygiene, social security, resources and the environment, quality standards, intellectual property rights and financial taxation, as well as abide by the principle of good faith, regulate internal management, and enhance operating management level; and shall not damage the legitimate rights and interests of workers or the social public interests.

Article 5 The State Council shall formulate policies on the development of SMEs, establish a work coordination promotion system for SMEs and make overall arrangements for the promotion of small and medium-sized enterprises of the whole country.
The department of the State Council in charge of the comprehensive management of the promotion of SMEs shall organize the implementation of SME development policies, and provide macro guidance, comprehensive coordination, and carry out supervision and inspection of SME promotion work.
The relevant departments of the State Council shall, in accordance with the policies of the State on the promotion of SMEs, be responsible for the promotion of SMEs within their respective scope of duties.
Local people's governments at or above the county level shall establish a coordination mechanism for the promotion of SMEs according to the actual conditions, specify the corresponding department in charge of the comprehensive management of the promotion of SMEs, and be responsible for the promotion of SMEs within their respective jurisdiction.

Article 6 The State shall establish a statistical monitoring system for SMEs. The statistical department shall reinforce the statistical investigation, monitoring and analysis of SMEs, and regularly release the relevant information.

Article 7 The State shall promote the construction of a credit system for SMEs and establish a social credit information collection and evaluation system to realize the socialization of the inquiry, communication and sharing of credit information of SMEs.

Chapter II Financial and Tax Support

Article 8 The central budget shall create an account for SMEs at the corresponding level for earmarking special funds for supporting the development of SMEs.
The local people's governments at or above the county level shall earmark special funds for supporting the development of SMEs at the corresponding budget level in light of the actual situations.

Article 9 The special funds for the development of SMEs shall, through subsidy, purchase of services and rewards, be mainly applied to support the construction of the public service systems and financing service systems for SMEs.
The special funds for the development of SMEs shall favor small and micro enterprises, and the management and use of funds shall adhere to the principle of openness and transparency with the adoption of budget performance management.

Article 10 The State shall establish a fund for the development of SMEs. The National SME Development Fund shall follow the policy-oriented and market-oriented operation principles to be mainly applied to guide and promote social funds to support SMEs at the start-up stage to promote entrepreneurship and innovation.
Local people's governments at or above the county level may establish SME development funds.
The administrative measures for the establishment and application of SME development funds will be formulated by the State Council.

Article 11 The State shall adopt a taxation policy conducive to the development of small and micro enterprises, take measures such as the postponement of the imposition of, reduction of or exemption from enterprise income tax or value-added tax for eligible small and micro enterprises as per provisions, simplify the tax collection and administration procedures, and reduce the tax burden on small and micro enterprises.

Article 12 The State shall implement favorable policies such as reduction of or exemption from administrative fees for small and micro enterprises to reduce the burden on them.

Chapter III Financing Promotion

Article 13 A financial institution shall give play to the role of serving the real economy, and efficiently and fairly serve SMEs.

Article 14 The People's Bank of China shall comprehensively use monetary policy instruments to encourage and guide financial institutions to increase their credit support for small and micro enterprises and improve the financing environment for small and micro enterprises.

Article 15 The banking regulation institution of the State Council shall formulate differentiated regulatory policies for financial institutions providing financial services for small and micro enterprise and adopt measures such as reasonably increasing the tolerance to non-performing loans provided to small and micro enterprises, and guide financial institutions to increase the scale and proportion of financing services for small and micro enterprise and improve the quality of financial services.

Article 16 The State shall encourage all kinds of financial institutions to develop and provide financial products and services in line with the characteristics of small and medium-sized enterprises.
The state policy financial institutions shall, within the scope of business thereof, adopt various forms to provide financial services for SMEs.

Article 17 The State shall promote and support the construction of inclusive financial systems, promote the orderly and healthy development of small and medium-sized banks, non-depository lending institutions and Internet finance, and encourage and guide banking institutions to extend their outlets and business to regions such as counties and townships where financial services for small and micro enterprises are weak.
State-owned large commercial banks shall establish inclusive financial institutions to provide financial services for small and micro enterprises. The State shall impel other banking institutions to set up financial service franchise institutions for small and micro enterprises.
Regional small and medium-sized banks shall proactively provide financial services for small and micro enterprises at the place where they are located respectively, so as to promote the development of the real economy.

Article 18 The State shall improve the multi-level capital market system, promote equity financing through various channels, develop and regulate the bond market, and promote the direct financing of SMEs by different means.

Article 19 The State shall improve the secured financing system, and support financial institutions to provide secured financing by putting up accounts receivable, intellectual property rights, inventories, machinery and equipment, etc. as collaterals.

Article 20 Where a small and medium-sized enterprise applies for secured financing by putting up accounts receivable as collateral, the payer for accounts receivable shall responsively confirm the lending relationship to support SME financing.
The State shall encourage SMEs and payers to confirm the lending relationship through the financing service platform to improve financing efficiency and reduce the costs of financing.

Article 21 The people's governments at or above the county level shall establish a policy credit guarantee system for SMEs to encourage all kinds of guarantee institutions to provide credit guarantees for SME financing.

Article 22 The State shall impel insurance institutions to conduct loan guarantee insurance and credit insurance business for SMEs, and develop insurance products that meet the demand of SMEs for risk diversification and compensation for losses.

Article 23 The State shall support credit reporting agencies to develop credit reporting products and services for SME financing and garner information from relevant government departments, public utilities and commercial institutions according to the law.
The State shall encourage third-party rating agencies to provide SME rating services.

Chapter IV Support for Entrepreneurship

Article 24 People's governments at or above the county level and the relevant departments shall, through government websites, publicity materials, etc., provide entrepreneurs with free legal and policy advice and public information services in respect of industry and commerce, finance and taxation, financing, environmental protection, safe production, labor employment, social security, etc.

Article 25 Any graduate of an institution of higher education, ex-serviceman, unemployed person or disabled person that starts a SME shall enjoy tax preferences and the reduction of or exemption from charges as per the state provisions.

Article 26 The State shall take measures to support social funds to participate in the investment in SMEs. Where a venture capital enterprise or individual investor invests in an innovative enterprise for science and technology at the start-up stage, it or he shall enjoy tax preferences as per the state provisions.

Article 27 The State shall improve the environment for entrepreneurial enterprises, optimize the examination and approval process to facilitate the administrative licensing of SMEs, and reduce establishment costs for SMEs.

Article 28 The State shall encourage the establishment and start-up of small and micro enterprise start-up centers and incubation bases and provide production and business premises and different services for small and micro enterprises.

Article 29 Local people's governments at all levels shall, according to the needs of the development of SMEs, arrange for necessary land and facilities in urban and rural planning and facilitate the acquisition of production and business premises by SMEs.
The State shall support the utilization of idle commercial houses, industrial factories, corporate warehouses, logistics facilities and so on to provide entrepreneurs with low-cost production and business premises.

Article 30 The State shall encourage Internet platforms to open technology, development, marketing, promotion resources and so on for SMEs, intensify resource sharing and cooperation, and provide services for the entrepreneurship of SMEs.

Article 31 The State shall simplify the procedures for deregistration of SMEs to facilitate the market exit for SMEs.

Chapter V Innovation Support

Article 32 The State shall encourage SMEs to promote innovation in technology, products, management modes and business models according to market demand.
Where it is necessary to accelerate the depreciation of the fixed assets of SMEs for the reason of technical progress, etc., the depreciation period may be shortened or the accelerated depreciation method may be adopted.
The State shall improve the weighted deduction policy for the research and development expenses of SMEs in order to support their technical innovation.

Article 33 The State shall support SMEs to apply modern technical means such as the Internet, cloud computing, big data and artificial intelligence in links such as research, development and design, production and manufacture and operating management to innovate production methods and enhance production and operation efficiency.

Article 34 The State shall encourage SMEs to participate in the research and development of industrial key generic technologies and the implementation of scientific research projects established by financial funds.
The State shall impel military and civilian integration and deep development, and support SMEs to participate in scientific research and production activities of national defense.
The State shall support SMEs and relevant industrial organizations of SMEs to participate in the development of standards.

Article 35 The State shall encourage SMEs to research and develop technologies and products with proprietary intellectual property rights, regulate the management of internal intellectual property rights and enhance the capacities to protect and apply intellectual property rights; encourage SMEs to participate in intellectual property rights insurance; and reduce the burden of SMEs in regard to the costs for applying for and maintaining intellectual property rights, etc.

Article 36 The relevant departments under the people's governments at or above the county level shall provide support in the fields of planning, land use and finance to promote the establishment and development of various types of innovation service agencies.
The State shall encourage various types of innovation service agencies in providing technical information, R&D design and application, quality standards, experimental tests, inspection and testing, technology transfer, technical training and other services for SMEs so as to promote the transformation of scientific and technological achievements and promote the upgrading of technologies and products.

Article 37 Relevant departments under the people's governments at or above the county level shall expand channels and take measures such as subsidies and training to guide graduates of institutions of higher education to obtain a job at SMEs and help SMEs to introduce innovative talents.
The State shall encourage scientific research institutions, colleges and universities and large enterprises to create conditions to make experimental facilities accessible to SMEs to conduct technical R&D and cooperation, and help SMEs to develop new products and cultivate professionals.
The State shall encourage scientific research institutions and institutions of higher education to support the scientific and technological personnel thereof to engage in industry-university-research cooperation and the transformation of scientific and technological achievements at SMEs by means of taking a part-time job, taking up a temporary post, participation in project cooperation, etc., and obtain corresponding remunerations as per relevant state provisions.

Chapter VI Market Development

Article 38 The State shall improve market systems, adopt unified market access and market regulation systems, oppose monopoly and unfair competition, and create a fair competitive market environment for SMEs.

Article 39 The State shall support large enterprises and SMEs to establish stable cooperative relationships with small and micro enterprises in respect of raw material supply, production, marketing, service outsourcing, technology development and technological transformation on the basis of respecting the role of the market in resource allocation to promote and facilitate the development of SMEs.

Article 40 Relevant departments under the State Council shall formulate relevant preferential policies for the government procurement from SMEs such as procurement demand standards, reserving procurement shares, concessions to price evaluation and preferential procurement to increase shares of SMEs in government procurement.
The share of procurement reserved for SMEs shall account for more than 30% of the total annual government procurement budgets for the sector, with a proportion of no less than 60% reserved for small and micro enterprises, with the exception of goods and services that SMEs cannot provide.
Government procurement shall not exert differentiated treatment or practice discrimination against SMEs in respect of enterprise shareholding structure, operation term, scale of operation and financial indicators.
Government procurement departments shall timely release procurement information to the public through the media designated by the government procurement regulation department to provide guidance and services for SMEs to win government procurement contracts.

Article 41 Relevant departments of the people's governments at or above the county level shall provide guidance and assistance for the export of products and services by SMEs with respect to legal consultation, intellectual property protection, technical trade measures and product certification to promote foreign economic and technological cooperation and exchanges.
National policy financial institutions shall support SMEs in developing overseas markets through the development of businesses such as import and export credit and export credit insurance.

Article 42 The relevant departments of people's governments at or above the county level shall facilitate SMEs in the use of foreign exchanges, exit and entry and so on to support them in overseas investment and developing the international market.

Chapter VII Service Measures

Article 43 The State shall establish and improve the socialized public service system for SMEs to provide services for SMEs.

Article 44 The local people's governments at or above the county level shall establish and improve the public service institutions for SMEs to provide them with public welfare services according to their actual needs.

Article 45 The departments in charge of comprehensive management of the promotion of SMEs under the people's governments at or above the county level shall establish cross-department policy information release Internet platforms, and responsively collect all kinds of government service information concerning laws, regulations, entrepreneurship, innovation, finance, market and rights protection in respect of SMEs so as to provide SMEs with convenient and free services.

Article 46 The State shall encourage all kinds of service agencies to provide services for SMEs, including entrepreneurship training and counseling, protection of intellectual property rights, management consulting, information consultation, credit services, marketing, project development, investment and financing, finance and taxation, property rights trading, technical support, talent recruitment, international cooperation, exhibition and legal advice.

Article 47 The departments in charge of the comprehensive management of the promotion of SMEs under people's governments at or above the county level shall arrange capital, and organize the implementation of training for the operating management personnel of SMEs in a planned way.

Article 48 The State shall support relevant institutions, colleges and universities in providing personnel training in the operation, management and production technologies of SMEs so as to raise the level of marketing, management and technology of enterprises.
The State shall support the cooperation between colleges and universities, vocational education institutions and professional skill training institutions and SMEs to jointly build practice bases, support the two-way exchanges between teachers from vocational education institutions and technicians of SMEs, and explore innovative talent training modes for SMEs.

Article 49 The relevant industrial organizations of SMEs shall safeguard the lawful rights and interests of its members according to the law, report the demands and complaints of the members, strengthen self-discipline management and provide services for SMEs to innovate and explore the market.

Chapter VIII Protection of Rights and Interests

Article 50 The State shall protect the property rights and other legitimate rights and interests of SMEs and their contributors. No unit or individual may encroach on the property of SMEs and their legal gains.

Article 51 The departments in charge of comprehensive management of the promotion of SMEs under the people's governments at or above the county level shall establish special channels to listen to the advice and suggestions of SMEs on the relevant governmental administration work, and timely provide feedback to the relevant departments to urge improvement.
Relevant departments under the people's governments at or above the county level and relevant industrial organizations shall make public their contact information, accept SMEs' complaints and reports, and investigate and deal with them within the prescribed time limit.

Article 52 The local people's governments at all levels shall implement the administrative licensing and conduct management in accordance with the law, and shall not carry out examinations without the basis of a law or regulation, or force a SME to participate in any activity such as assessment, evaluation, commendation and training directly or in a disguised way.

Article 53 State organs, public institutions and large enterprises shall not default on the costs of goods, projects and services of SMEs in breach of agreements.
SMEs have the right to request delinquent borrowers to pay money in arrears and claim compensation for losses caused by such default.

Article 54 No unit may, in violation of laws and regulations, impose charges on SMEs, and shall not expropriate property from SMEs. Otherwise, SMEs shall have the right to reject, report and sue for violations against the above-mentioned provisions.

Article 55 The State shall establish and implement a list system for the administrative charges related to enterprises. The lists of charges and imposition of charges shall be made public and receive social supervision.
No unit shall impose administrative fees other than those on the list of charges, or arbitrarily raise fees and charges and expand the scope of charges; it is strictly forbidden to use various means to coerce SMEs into making donations, subscribe to newspapers, join associations or receive designated services; it is strictly forbidden for trade associations to make unilaterally set charge items or raise charges by acting for the government or using administrative resources without authorization.

Article 56 The relevant departments under the local people's governments at or above the county level shall carry out supervision and inspection of SMEs according to the law, and establish a random inspection mechanism. Where the same department conducts multiple supervisions and inspections of a SME which can be consolidated, they shall be consolidated; where multiple supervision and inspections of enterprises conducted by different administrative organs can be consolidated, the local people's government at the corresponding level shall organize the relevant departments to make consolidation or conduct a joint inspection.

Chapter IX Supervision and Inspection

Article 57 A people's government at or above the county level shall regularly organize the supervision and inspection of the promotion of SMEs, correct behaviors in violation of this Law in a timely manner, and impose sanctions on the persons directly in charge and other persons directly liable in accordance with the law.

Article 58 The department of the State Council in charge of the comprehensive management of the promotion of SMEs shall entrust third-party institutions with the task of regularly carrying out an assessment of the development environment of SMEs and publish the results to the public.
Local people's governments at all levels may entrust a third-party institution with the task of carrying out an assessment of the development environment of SMEs in light of the actual situation.

Article 59 People's governments at or above the county level shall regularly organize the enterprise evaluation and social evaluation of use effects of special funds for supporting the development of SMEs and the fund for the development of SMEs as well as the dynamic estimation of use of the funds, and make public the evaluation and estimation situations in due time, and accept social supervision.
Relevant departments under the people's governments at or above the county level shall, within the scope of their respective duties, supervise the management and use of the special funds for supporting the development of SMEs and the fund for the development of SMEs, and investigate and treat behaviors such as retention, occupation, embezzlement, appropriation and corruption of the special funds for supporting the development of SMEs and the fund for the development of SMEs, and impose sanctions on the persons directly in charge and the other persons directly liable; if a crime is constituted, they shall investigate them for criminal liability in accordance with the law.

Article 60 Relevant departments under the people's governments at or above the county level shall, within the scope of their respective duties, investigate and treat the behaviors of forcing directly or in a disguised way a SME to participate in any activity such as assessment, evaluation, commendation or training, illegally collecting fees, imposing a fine on or apportioning any property for any SME, as well as other behaviors infringing the legitimate rights and interests of any other SME, and impose sanctions on the persons directly in charge and other persons directly liable in accordance with the law.

Chapter X Supplementary Provisions

Article 61 The Law will come into effect as of January 1, 2018.