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China to lower costs for real economy enterprises

Updated: Aug 22,2016 5:38 PM

The State Council has issued a circular to urge reducing costs for enterprises to ensure the stable growth of the real economy.

According to the circular, initial cost reduction should be made in the first one to two years, and enterprises should see rising profits in three years, after a reasonable cut in costs.

In order to cut taxes, the pilot program to replace the business tax with a value-added tax should be expanded to construction, real estate, finance, and services to ensure an actual reduction in the tax burden.

In addition, more work should be done to implement preferential tax policies on research and energy-saving and environmental protection equipment, streamline administrative charges concerning enterprises, and cancel some governmental funds, with exemption of contribution extended to more SMEs.

The circular said an appropriate monetary and financial environment is needed to keep reasonable liquidity.

Meanwhile, efforts should be made to reduce intermediate fees, strengthen financing guarantees, optimize evaluation and supervision on commercial banks, encourage establishment of private banks and equity financing, and guide enterprises to use low-cost overseas capital.

The document called for reduction of institutional transaction costs with efforts to break regional isolation and industry monopoly, deepen reform in streamlining administration, improving regulation and optimizing services, cut service fees, and solve any lingering problems at State-owned enterprises.

At the same time, the social credit system should be put in place to protect intellectual property rights to help enterprises safeguard their interests.

The circular urged cutting labor costs, including measures to reduce contributions to the social security and housing fund, and optimize the mechanism on minimum wages. Meanwhile, reform should be carried out to reduce enterprises’ costs in energy consumption and land use.

As another area to cut costs, logistics should be improved to encourage resource sharing, with measures to standardize transportation fees for roads, flights, and railways, and eliminate any improper charges.

In order to improve capital turnover, asset security and financial leasing are encouraged to liquidate stock assets, and more support should be in place to ensure constant capital support to enterprises. Local governments should take measures to pay off project arrears and regulate earnest payments in the construction sector to reduce the burden on enterprises.

The circular also called for establishing supporting mechanisms, pushing forward institutional reforms, encouraging innovation and improving public services to support efforts in cost reduction.