Government departments and State-owned enterprises to meet overdue payments to smaller private companies as much as possible before the end of 2020

The State Council executive meeting chaired by Premier Li Keqiang on Jan 8 made arrangements for ensuring that government departments and State-owned enterprises (SOEs) clear their overdue payments to private firms and small and medium-sized enterprises, and required that resolute efforts be made to see the work through.

Clearing payment arrears owed to private and small businesses bears on the market economic order, business environment and market expectations. Government's credibility is also at stake.

General Secretary Xi Jinping said that government departments and State-owned enterprises must under no circumstances incur payment arrears to private businesses, and effective measures should be taken to prohibit acts of sidestepping repayments. Premier Li Keqiang made clear the target and tasks in clearing arrears during the annual session of the National People's Congress last year, and stressed the need for resolute efforts to see the work through in this regard.

It was noted at the meeting that by the end of last year, some 75 percent of the more than 890 billion yuan in such arrears identified nationwide had been paid up, exceeding the original target of making no less than half of the payments in 2019.

The meeting urged redoubled efforts to see that due responsibilities be effectively fulfilled and that by the end of this year, all undisputed arrears be cleared as much as possible. Where dispute exists, it should be addressed more efficiently through mediation, consultation and judicial means, and no new arrears should be incurred.

"Strong efforts have been made in clearing such payment arrears, and progress has been made in this regard. Yet the government should still not let up on this front. A major part of overdue payments are owed by government authorities and State-owned enterprises to private, small businesses," Premier Li noted. "This has had an ill impact on government credit, on our business environment and market confidence, as well as on people's lives."

It was decided at the meeting that government departments at all levels must make concrete plans, down to each item and each category, for paying up the outstanding undisputed arrears. Those with large sums in arrears will be subject to oversight and scrutiny by dedicated task forces.

Provincial governments should shoulder the chief responsibility for repayment work in their provinces. They will coordinate efforts in formulating plans for subordinate cities and counties that are unable to make the repayments. Large SOEs must take holistic measures in their subsidiary companies to make sure that the repayment tasks are completed.

The meeting urged effective implementation of the Regulation on Ensuring Wage Payments to Migrant Workers and establishment of an inter-agency mechanism for resolving the arrears issue, especially wages owed to migrant workers. Intensified efforts will be made with a focus on wage arrears to migrant workers in government-invested projects. Going forward, sufficient funds must be set aside in all construction projects to ensure that wage payments to migrant workers are made on time and in keeping with the contractual terms. In particular, no government departments, State-owned enterprises or public institutions should, for whatever reason, owe migrant workers wages.

SOEs will be urged to strengthen internal discipline for making payments on time, and make the control and clearing of due payments part of their internal evaluation. No repayments should be made in commercial bills or other non-monetary forms without the consent of the recipients.

The meeting also required issuing a regulation regarding timely payments to small and medium-sized enterprises. Governments at all levels must tighten their belts, practice frugality and live within their means. No government-invested project without solid funding will be approved. Irregularities such as implementing projects outside the budget plan, starting construction before getting approval, or asking construction entities to make advance payments, will be seriously dealt with.

"We must establish a long-term mechanism to prevent arrears by government departments and SOEs. New government officials must not disavow obligations undertaken by their predecessors. All undisputed arrears must be paid off by the end of this year," Premier Li said.