An updated law that supports small and medium-sized enterprises in China took effect from Monday. The measure is based on 2003 regulations and adds specific provisions for the protection of small companies. Our reporter Chen Tong has the details.

One of the law's new provisions is called "Rights Protection," and includes seven detailed regulations that prevent any institution or company from defaulting on payments to a small or medium-sized firm. Another high point of the new law is related to finance, and says the government will "guide" banks and online lending companies to expand business in rural areas to support small sized firms. Other provisions touch on support in term of innovation, taxation, marketing and supervision.

CHENG JIAMAO, PARTNER DACHENG LAW OFFICES, SHANGHAI "Compared with the old version, the new law sets out clear definitions of legal duties in term of tax and finance. Of course, there are other aspects, but these two have seen the most obvious improvements. Using laws to solve problems for small and medium sized firms will give stability and guarantees to the small companies, which gives them something to rely on in the future."

Currently, China's small firms have difficulty obtaining financing, just because they are small. Compared with large companies they often lack credit and so large banks are rarely willing to issue them loans. Lawyers say that some SMEs have had to turn to illegal private lenders for loans. Government guidance to banks and legitimate online lenders should give the SMEs better access to operating finance.

YU BAICHENG, DIRECTOR WANGDAIZHIJIA RESEARCH INSTITUTE "Traditional financing channels pay more attention to collateral, such as fixed-assets. But SMEs, especially micro companies, don't have enough to mortgage, so it's difficult for them. Recently there's been the development of private lending and online lending. The new amendments emphasize the stability of internet finance, and internet finance companies are major lenders to small companies."

As of the end of the third quarter of 2017, 42 million small and medium sized firms were registered nationwide, accounting for 99 percent of all companies in the country, and a 50 percent increase from 2016. And with the increasing number of SMEs has come increased business opportunities. Data from Wangdaizhijia show that one third of the lending capital of online lending companies goes to SMEs.