Wen Pledges Help for Small Businesses

—Eliot Gao, Shen Hong and Esther Fung

BEIJING—Chinese Premier Wen Jiabao said the government will move to help the country's economically vital but financially strapped small businesses, including setting up a 15-billion-yuan ($2.39 billion) special fund to support the development of small and midsize enterprises.
The premier's announcement at a cabinet meeting on Wednesday comes at a time when China's smaller enterprises are facing increasing financial stress amid a slowing economy.
In addition to having to cope with a deteriorating export environment, China's small and midsize businesses were further squeezed last year by tight monetary conditions imposed by Beijing to fight inflation and engineer a soft landing for the economy.
China will improve fiscal and tax policies to support small businesses, Mr. Wen said, adding that such companies, which employ a large proportion of the country's work force, face rising costs and financing problems.
The government will offer tax incentives, easier access to capital markets and outright cash support, he said. In addition, the government will support the stock listings of more small companies and encourage qualified commercial banks to issue financial bonds to finance loans to small businesses.
Mr. Wen said China will also push ahead with an existing, but small-scale trial to replace the country's business tax with a value-added tax. And the government will also make it easier for domestic and foreign private capital and international organizations to invest in and establish small financial institutions, he said.
Mr. Wen reiterated that China will allow greater forbearance on nonperforming loans to smaller companies. Data released Wednesday offered further evidence of the difficulties faced by such businesses.
The HSBC China Manufacturing Purchasing Managers Index—a gauge of nationwide manufacturing activity but weighted more heavily towards smaller-sized companies— contracted for the third straight month, rising marginally to 48.8 from 48.7 in December.
The reading indicates that manufacturing remains weak in the world's second-largest economy, and economists said that China need more aggressive easing measures to support growth.
Meanwhile, the average housing price in 100 major Chinese cities fell for a fifth consecutive month in January as China's property market continued to slow, a survey showed on Wednesday.
Still, the pace of decline slowed in January, which indicates that property prices are softening at a steady pace, easing some concerns of a sharp plunge in the market for now.
The data were released a day after Mr. Wen reiterated the government's stance that it must continue with macroeconomic controls, consolidate its property-tightening campaign and bring about a "reasonable" correction in housing prices.
China Real Estate Index System said the survey of property developers and real-estate agencies showed the average home price in January was 0.18% lower from a month earlier at 8,793 yuan ($1,390) a square meter.
The average home price in December stood at 8,809 yuan, down 0.26% from November. The survey has been widely followed since China scrapped a national property-price index in February 2011.
Property prices in 60 cities fell in January compared with the previous month, whereas 39 cities posted a rise. Compared with a year earlier, the average price of a new home in January climbed 1.71%, slower than December's 2.86% rise.
Analysts said prices will continue to contract as the government is resolved to continue to cool the property market.
"Prices won't rebound as long as the tightening policies remain in place, though sometimes there appear to be mixed signals regarding the government's implementation of the property curbs, which would confuse the market," said Song Huiyong, research director of Shanghai Centaline Property.