Minimum Registered Capital Rules End: China's Printing Industry Braces for Vitality and Stricter Oversight

Printing, one of China's traditional industries, has long been a significant part of the national economy. The latest removal of minimum registered capital requirements lowers the sector's entry barrier once again and is expected to bring fresh momentum to a printing industry currently at a low point in its development cycle.

On October 25, the State Council executive meeting studied and deployed reform of the company registered capital registration system. The reform includes: removing the minimum registered capital requirements for limited liability companies, one-person limited liability companies and joint stock companies; no longer restricting the capital contribution ratio of shareholders (promoters) or the deadline for paying in contributions when a company is established; and ending the treatment of paid-in capital as an item of industrial and commercial registration. It also changes enterprise annual inspection into a reporting system, relaxes registration conditions for the domicile (business premises) of market entities, vigorously promotes an enterprise integrity system, and moves registered capital from a paid-in registration system to a subscribed registration system.

Lower Entry Barriers Set to Unleash Vitality in Printing Enterprises

The relaxation of registered capital rules has cheered many entrepreneurs and those who have been hovering at the edge of starting a business. In theory, everyone can now own a company—a major boost especially for small and medium-sized enterprises, micro and small enterprises, and the large number of returnees and university graduates starting ventures. For the printing industry, which has 100,000 enterprises and is mostly made up of SMEs, the news is equally positive. By lowering entry barriers, the reform is expected to further energize a group of small and medium-sized as well as micro and small printing enterprises and drive the industry toward greater prosperity.

Since the start of this year, the state has in fact made multiple efforts to advance reform in the printing sector. On June 19, the State Council approved the 'Three Determinations' regulations for the State Administration of Press, Publication, Radio, Film and Television. While the printing industry's regulatory responsibilities remain unchanged, digital printing and green printing were included in the new regulations—a sign of the national-level importance attached to the industry's healthy and sustainable development.

At its executive meeting on July 24, the State Council decided that, to support micro and small enterprises and in line with fair tax burden principles, starting August 1 this year, small-scale VAT taxpayers and business tax taxpayers among micro and small enterprises with monthly sales of no more than 20,000 yuan would be temporarily exempt from value-added tax and business tax. This has eased the burden on micro and small printing firms to a certain extent.

'Wide Entry, Strict Supervision' Drives Administrative Streamlining in Printing

At the 2013 National Printing Managers Annual Conference in September, Wang Yanbin, Director General of the Printing and Distribution Department of the State Administration of Press, Publication, Radio, Film and Television, said in his keynote speech that, following the Administration's deployment, efforts would be made to clearly define the boundary between government and market, take the initiative in doing what government should do, and guide and drive the rapid development of China's printing industry.

Wang noted that the market leads industrial development while government guides it. The current institutional reform therefore focuses on combining institutional adjustment with functional transformation, with functional transformation at the core and administrative approval reform as the breakthrough. Through streamlining administration and delegating power, it aims to further give play to the market's fundamental role in resource allocation and stimulate the creativity of all market entities. Put simply, whether to open a printing plant, what type of printing plant to open and how much to invest should be decided by enterprises based on changes in market supply and demand.

Wang stressed that, under the central government's 'wide entry, strict supervision' approach, the printing industry will see more approvals canceled, procedures simplified and areas opened through administrative streamlining and power delegation. Given that much capital remains willing to invest in printing, the entry threshold should be studied promptly. Adjusting the entry system should attract qualified and motivated enterprises to enter quickly, using effective delegation to support active supervision. Reducing approvals and simplifying procedures can squeeze out excess and costs from capital entering the sector—especially for private and foreign-funded enterprises—so that funds move faster into production and the market and capital's role in the market is activated.

Printing Oversight Is Set to Tighten

Reducing approvals and simplifying procedures, however, does not mean the state is completely relinquishing control over printing enterprises. The State Council recently approved policies related to the 'Shanghai Pilot Free Trade Zone.' To promote the transformation of government functions, the Shanghai Pilot FTZ will explore the negative list as a new economic management model. For general foreign investment projects not on the negative list, a business license, organization code and tax registration can be obtained in as little as four days. The negative list includes restrictions on investment in publication printing: investment in publication printing must be controlled by the Chinese side, and registered capital must be no less than 10 million yuan.

Wide entry is premised on strict supervision. On the instructions of Jiang Jianguo, Secretary of the Administration, the Administration has further strengthened and improved printing supervision and will resolutely 'investigate and punish a batch, rectify a batch and shut down a batch' of seriously non-compliant enterprises. In 2012, 724 printing enterprises nationwide received administrative fines, 42 had their business licenses revoked, and the legal representatives of 15 printing enterprises were transferred to judicial authorities for violating the law. Local authorities have also used annual inspection and verification to tighten entry and exit management. Through annual verification, Henan Province deregistered 81 printing enterprises last year, Anhui 45, Hubei 35, Guizhou 24 and Sichuan 20.

Printing Enterprises Must Strengthen Their Own Management

With the registered capital reform and printing industry decentralization as opportunities, printing enterprises have seen further vitality released. Yet for many printing companies, the registered capital registration reform is also a double-edged sword. Under the State Council's plan, the annual inspection system will become an annual reporting system that any organization or individual can consult, making enterprise-related information more transparent. At the same time, the enterprise integrity system will be vigorously promoted, with information disclosure and sharing used to publish enterprise registration and filing, annual reports, qualifications and other details through the market entity credit information system. These changes impose new requirements on printing enterprise management.

Printing companies need to further strengthen internal management. Compared with the past, they must face society-wide supervision with greater openness, transparency and integrity. Being market-demand oriented means resolving more development issues through market mechanisms. China's printing industry currently faces overcapacity and other challenges, and lower entry barriers will further intensify competition. If a company fails to improve its management, any violation could bring pressure of being 'restricted everywhere,' while the 'cost of lost credibility' will rise as information disclosure deepens. For printing enterprises in the midst of change, this is indeed the best of times and the worst of times.

——Source: China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-361860.html