Easier company registration to help SME growth

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Easier company registration to help SME growth

(Xinhua) 19:56, October 28, 2013

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The Chinese government's latest move to streamline company registration offers a prime opportunity for business startups, especially small and medium-sized enterprises (SMEs), analysts have said.

On Sunday, the government announced that it would streamline its corporate registration system to ease market access and encourage social investment, according to a statement issued after a State Council executive meeting.

Minimum registered capital requirements for limited liability companies, one-person limited liability companies, as well as joint-stock companies with limited liability will be scrapped, the statement said.

Currently, minimum registered capital for limited liability companies is 30,000 yuan (4,891 U.S. dollars), while that for one-person limited liability companies and joint-stock companies is 100,000 yuan and 5 million yuan, respectively.

New measures also include loosening controls over sites registered for business operations, replacing the current annual inspections on companies with annual reports open to public inquiry, as well as improving the mechanism for promoting business integrity.

Zhang Liqun, a researcher with the Development Research Center of the State Council, said the move will help improve the investment environment and stimulate the vitality of social investment.

It is an encouragement for the private sector, as private investors will face much fewer barriers in establishing businesses, Zhang said.

Wang Nianping, an official with the SME bureau of north China's Shanxi Province, agreed, saying that the measures relaxed controls over startups and relieved the burden of companies.

The move is especially good news for the country's SMEs as high startup costs have been "a stumbling block" for them, Wang said.

The measures open the gate for those who want to set up businesses but have limited funds at hand, he added.

Li Chunguang, owner of a mechanical equipment company in Shanxi, said he was required to have a total registered capital of 5 million yuan three years ago when he started the company.

"That was a lot of money for me at that time," he said.

Li believes removing the restriction on registered capital will allow companies to invest more in production materials and accelerate capital turnover, and thus benefit their growth.

According to National Bureau of Statistics data, SMEs provide more than 80 percent of jobs in Chinese cities. The number of micro-, small and medium-sized enterprises represents 99.7 percent of the total in China.

Wang Nianping also said relaxing control over registration should come along with a mechanism to eliminate bad companies, while "the country should strengthen supervision on registered companies and improve related laws."

According to the Sunday statement, the government will blacklist companies that provide unacceptable customer service to raise the cost of having bad credit.

Zhang Mao, director of the State Administration for Industry and Commerce (SAIC), said the reform does not connote the relaxation of supervision, but places higher requirements on the government's monitoring of registered companies.

"The SAIC will combine administrative, economic, legal and self-disciplinary measures to intensify supervision and make it more effective," he vowed.