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Incentives, Subsidies and Funding for Tech SMEs in China

By EU SME Centre | Report      27.10.2021     Tags:

Access to government incentives and funding instruments at acceptable terms is a key factor for the execution of research and innovation activities. This is especially the case for early-stage businesses and small and medium-sized enterprises (SMEs), which often have complex technologies and products, untapped markets, and intangible assets.
 
Government administrations in China at all levels, have been extremely active in establishing a wide range of incentives and funding instruments to support the growth of innovative and tech companies within their jurisdictions. These target different company development stages and cover all types of innovation activities, from research and development (R&D) to application, demonstration, and commercialisation, and also to technological upgrading achieved by purchasing new hardware/software. Though dominated by domestic actors, government incentives and funding instruments in China are also open to foreign-invested enterprises. Awareness of these opportunities, however, remains overall low. This report directly addresses this issue, thus aiming to increase the awareness and accessibility of European tech SMEs 1 to Chinese public resources.
 
This report groups incentives and funding instruments available in China into five main groups:
▪ Market entry incentives (Chapter 1): made available by local administrations to attract innovative international companies to settle in their jurisdiction. 
 
▪ Status recognition (Chapter 2): namely certain statuses that tech companies can be ‘recognised’ (认定) to hold for different purposes. Benefits associated with them involve tax deductions or cash rewards; at the same time, such statuses often constitute a key requirement (written or unwritten) for obtaining other government incentives and funding instruments, as they increase the ‘credibility’ of one company in the eyes of the local administration.
 
▪ Subsidies (补助) and rewards (奖励) (Chapter 3): offered ex post at all levels of administration for basically any type of innovation activity.
 
▪ Research grants (资助) (Chapter 4): offered ex ante to support activities such as R&D, application, and demonstration in priority areas and topics specified in annual calls (年度申报指南) published on the websites of local departments of science and technology. 
 
▪ Innovation vouchers (科技创新券) (Chapter 5): consisting of small lines of credit granted to micro, small and medium-sized companies, and entrepreneurs to purchase, at discounted rates, specific services provided by local providers. 
 
The underlying argument of this report is that government incentives and funding instruments from local administrations in China can represent a good source of revenue for European tech companies in China and lower the costs of their innovation activities. To achieve this purpose, however, a series of key considerations and recommendations outlined at the end of this report must be kept in mind. 
 
This report makes extensive use of case studies from specific incentives and funding instruments available in different regions and at different levels of administration. 
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