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Chinese ministries give SMEs preferential policies in gov't procurement

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BEIJING, Jan. 6 (Xinhua) -- The government has created preferential procurement policies for small- and medium-sized enterprises (SMEs) to boost their development, according to a government statement issued on Friday.

It is often difficult for SMEs to win tenders when bidding for government procurement projects due to the government's strict procurement requirements, said a joint statement by the Ministry of Finance (MOF) and the Ministry of Industry and Information Technology (MIIT).

Government departments normally prefer larger companies and brands during the procurement process, adding to the difficulties SMEs already face, the statement said.

When budgeting for government procurement, authorities should set aside at least 30 percent of their total budget for SMEs, of which at least 60 percent should be dedicated to small- and micro-sized enterprises, the statement said.

Small- and micro-sized businesses will also get an extra price preference between 6 and 10 percent when they submit a tender for government procurement projects, the statement said.

The government has also encouraged SMEs to form consortiums while allowing large enterprises to purchase products from SMEs during subcontracting.

The definition of what constitutes a small, medium or "micro-sized" company in China varies by sector. For industrial companies, those with fewer than 1,000 employees and an annual income of less than 400 million yuan (63.32 million U.S. dollars) qualify as SMEs. Companies with fewer than 20 employees and less than 3 million yuan in income are considered to be "micro-sized."

China's government procurement reached 842.2 billion yuan in 2010.

Small businesses were squeezed in China last year due to limited access to credit from banks. Although SME data from 2011 has yet to be released, small- and mid-sized enterprises are believed to have created about 80 percent of the country's jobs last year.

In 2009, China's registered SMEs exceeded 43 million in number and accounted for 58.5 percent of the country's gross domestic product, half of its tax revenues and 68 percent of its exports, according to the China Association of Small and Medium Enterprises.

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