Premier Li Keqiang said the government must deliver the promise of reducing the social insurance premium paid by employers this year, especially by small and micro firms.

At the State Council executive meeting on March 26, the Premier urged that local authorities must not take any actions that result in raising the social insurance premium burden of small and micro firms, and must not order them to settle the back pay of premium.

The promise of cutting employers’ social insurance premium was made in the Government Work Report this year and was stressed when the Premier met the press at the end of the second session of the 13th National People’s Congress. It has been announced that, starting May 1, China will reduce the share of enterprise contributions to urban workers’ basic old-age insurance from 20 percent to 16 percent.

“What we are doing is responding to the voice of market players who urge reducing premium rate. So we must deliver our words and make the market entities get the sense of gain,” Premier Li said.

According to the Premier, although the government plans to cut taxes and employers’ social insurance premium by nearly 2 trillion yuan ($297.9 billion) this year, there will not be a substantial increase in the budget deficit nor will the monetary policy be eased. Instead, the government will slash its own expenditure.

Premier Li said the central government will cut expenditures by 10 percent this year, except for fixed expenditure and funding for priority projects. He also directed local authorities to tap into the potential of reducing expenditure.

“If we take a look at some local governments’ account, we can find that they have rather remarkable assets, like buildings and idle funds, even if they talk about the pressure of issuing social insurance benefits,” he said.

“For public interest, we must move their cheese,” he added.

China has a medium-level nominal corporate fee rate across the world, but in some places, there are still many bureaucratic fees, which is a big problem, the Premier said.

The executive meeting required local governments to reexamine and lower the upper- and lower-limits of the social insurance base according to weighted average salary of all the non-private employees and private employees in the province, rather than the average salary of non-private employees in urban areas in the past. Individual business and persons in flexible employment can choose payment base between 60 percent and 300 percent of the province’s average wage.

The meeting also decided to extend the policy of reducing the premium rates for unemployment and work-related injury insurances for one more year, to April 2020.

Small and micro enterprises have created most of the jobs, Premier Li said while urging the government to ensure effective reduction of their payment burden.

He stressed more efforts to speed up old-age insurance reform at provincial level, continue to increase the share of central adjustment fund in enterprise workers’ basic old-age insurance, and transfer some State-owned capital to social insurance funds.

Social insurance fee rates reduction at this time must ensure a substantial decline in the payment burden of enterprises, especially small and micro enterprises, he said, adding that the social insurance benefits of employees should not be affected and the old-age pensions should be paid on time and in full.

The government must give up its own interests to benefit the people and market players, this means a lot to both market vitality and government’s credibility, the Premier emphasized.