According to China's vice minister of finance Zhang Hongli, tax concessions will be offered to small businesses making low profits under the revised corporate income tax law scheduled to take effect in 2008.

Zhang pointed out that as the most active players in the market economy, small- and medium-sized enterprises (SMEs) offer numerous job opportunities and technology innovations. As such, they help promote competition and forestall monopoly. However, SMEs face difficulties in terms of access to capital, technology and information. Government support in these areas is therefore essential. 

According to Zhang, the Ministry of Finance plans to further enhance the package of tax concessions in support of SMEs during the 11th Five-Year Programme period. The focus of the new measures will shift gradually from helping the weak to activating market competition. 

Under the new corporate income tax law that goes into effect next year, the tax rate will be unified at 25% for all types of enterprises. Small businesses that meet the definition of low profit makers will be eligible for the reduced rate of 20%. Zhang explained that the rationale of this preferential treatment is to create a level playing field for SMEs and large enterprises.

According to official statistics, there were over 4.3 million SMEs registered at industry and commerce administrations across the mainland as at the end of June 2006. The combined value of their products and services now accounts for nearly 60% of China's GDP. SMEs’ shares in the country's total tax revenue and urban employment stand at 50% and over 75% respectively.