China’s latest cut in social insurance payments will offer enterprises a strong buffer against losses caused by the novel coronavirus outbreak, officials and experts said on Thursday.
To help enterprises withstand the epidemic and stabilize employment, the country will cut corporate contributions to the old-age pension, unemployment and workplace safety insurance funds by at least 500 billion yuan ($71.3 billion) this year, according to You Jun, vice-minister of human resources and social security.
This amount will exceed last year’s total reduction in corporate contributions to the social insurance system of over 400 billion yuan, You said at a media briefing on Thursday in Beijing.
“We hope that the reduction and exemption of enterprises’ social insurance payments will ease their difficulties in production and operation,” he said.
According to You, nationwide micro, small-and medium-sized enterprises－as well as all types of enterprises in Hubei province, the outbreak epicenter－will be eligible for exemption of the above three types of social insurance payments from February to June.
Large enterprises outside Hubei will see their contributions halved from February to April, You said.
Nationwide companies will see another 150-billion-yuan fee reduction at most, as regional governments are allowed to halve corporate contributions to the basic medical insurance fund from February to June, according to Chen Jinfu, deputy head of the National Healthcare Security Administration.
Local governments can formulate their own contribution reduction plans based on actual situations, so as to ensure the long-term sustainability and withdrawals of the fund, Chen said.
In addition, companies can apply to defer payments to the housing provident fund, while those undergoing severe difficulties due to the epidemic are eligible for the deferral of the three types of social insurance payments for as long as six months.
The authorities have fully considered the capability of the social insurance funds to afford the temporary exemption, and the fee reduction will not hurt sustainability of the nation’s social insurance system, officials said.
For the regions that have lower ability to digest the exemption of old-age pension fund contributions, the country will ramp up the supplement from the central government and reallocate the fund among different regions, according to Vice-Finance Minister Yu Weiping.
Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, said the above measures will strengthen support from the fiscal side to enterprises and therefore help stabilize the labor market.
“But merely lowering the contributions is not enough from the longer term perspective. We should speed up the reform and the integration of social insurance systems,” Dong said.
Apart from the fiscal side, the financial sector has also stepped up support to the real economy. By Wednesday, banks in Shanghai have offered up to 90 loans valued at 1.31 billion yuan to 48 key companies, with the weighted average interest rate coming in at 2.35 percent, said Li Jun, deputy director of the Shanghai financial services office.
All the loans have been granted within two days, and are mainly used to support manufacturing of epidemic control and prevention products and for procurement of medicines, Li said.
A total of 54 banks in Shanghai have offered loans valued at 17.6 billion yuan which are targeted at the companies affected by the epidemic, especially SMEs. Up to 1,796 companies have successfully applied for the loan, with the interest rate at around 3.62 percent.
About 350 million yuan of fees and interest have been reduced for another 4,360 companies that are seriously impacted by the epidemic, said Li.