China to clear arrears owed to SMEs, ensure wage payment to migrant workers

China will take measures to clear arrears owed to small and medium-sized enterprises (SMEs), and ensure migrant workers' wages are paid on time and in full, the State Council's Executive Meeting chaired by Premier Li Keqiang decided on Wednesday.

The meeting noted the relatively fast increase in the accounts receivable of SMEs and rising incidences of delinquent payment this year due to the complex and challenging circumstances at home and abroad, sporadic COVID-19 cases in multiple places and other factors.

"Efforts to address overdue payment owed to SMEs has a direct bearing on fostering a world-class, market-oriented business environment governed by a sound legal environment," Li said.

"Smaller firms have been under enormous pressure this year. In keeping with the requirement of supporting market entities, efforts will be intensified to rectify arrears to SMEs as the laws and regulations require," he said.

Regulations on Ensuring Payments for Small and Medium-sized Enterprises will be strictly implemented, to overhaul malpractices including abuse of market advantages for malicious arrears.

Government bodies and public institutions that purchase goods, projects and services from SMEs should make payments within 30 days upon order completion, and the time-frame for making such payments should not exceed 60 days.

Government bodies, public institutions and large enterprises must not force smaller firms into accepting non-cash payment methods such as commercial acceptance bills, and must not misuse commercial acceptance bills to occupy smaller firms' funds for their own use in disguised forms. Large enterprises will be urged to disclose the information regarding delinquent payments owed to SMEs in their annual reports.

"We introduced a regulation with explicit stipulations on this matter. We must make sure they are effectively enforced," said the premier.

Sub-national governments and competent government departments must earnestly fulfill their jurisdictional responsibility and regulatory responsibility. Audit-based oversight will be intensified, according to the meeting.

Delinquent payments by government bodies, public institutions and large state-owned enterprises to SMEs will be strictly investigated, and accountability will be seriously enforced. Serious acts of bad faith will be disclosed to the public.

Greater efforts will be made to develop long-term mechanisms. Relevant systems for settling construction project costs will be improved, and the proportion of progress-based payment in construction projects increased.

Guarantee letters and insurance certificates will be fully promoted to replace security deposit. Matching policies of the Regulations on Improving the Business Environment will be drafted at a faster pace, to reduce and prevent the problem of arrears at root, said the meeting.

"Wage arrears for migrant workers are closely related to this issue," Li said. "There are nearly 290 million migrant workers in China. Job wages are the major source of income for rural residents in China. Governments at all levels and SOEs should lead by example to clear arrears, and SMEs must also pay migrant workers the remunerations they deserve as the laws and regulations require."

The meeting highlighted that ensuring on-time and full wage payment is an important task that bears on the basic living needs of migrant workers' families. At the turn of the year, various programs and projects enter the stage of fund settlement.

The special winter campaign will be carried out to intensify efforts in addressing wage arrears for migrant workers. The project construction sector will be a priority, especially projects funded by governments or undertaken by SOEs.

Implementation of relevant institutional arrangements such as special payment account and payment to migrant workers by general contractors on behalf of subcontractors will be reviewed across the board. Market regulation and audit-based oversight will be intensified.

Problems of wage arrears will be punished to the full extent of laws and regulations, and those with dereliction of duty will be named and held to account according to relevant regulations, to effectively safeguard the lawful rights and interests of migrant workers.

"Supporting SMEs is supporting job creation, and securing wage payment for migrant workers is securing people's well-being," Li said.