The State Council decided on June 15 to overhaul the practice of deposit payments in the construction sector, in a move to generate more funds for construction projects. The deposit payments are commonly paid to the government before projects start and are returned after the projects are finished.
The move is estimated to help revitalize over one trillion yuan in capital funds, which has been a burden on enterprises in the construction sector.
In April, the Ministry of Housing and Urban-Rural Development acknowledged in a released notice that the large amount of deposit payments and prolonged payback period have severely hampered enterprises’ operations, especially those in the construction sector. Construction is regarded as a low-profit industry, with a less than 3 percent profit rate, and the deposits come mainly from bank loans, which results in higher costs, further lowering their profits.
In the construction sector, an ongoing problem is that there are excessive deposits with unclear legal basis or standards.
The State Council emphasized that all deposit payments should be in line with laws. Overlapping deposits collected by several departments should also be avoided.
As a pillar industry, the construction sector’s total production reached 18.08 trillion yuan in 2015, with over 50 million employees, taking up nearly 27 percent of GDP, according to Wang Tiehong, president of the China Construction Industry Association.
The industry should speed up its transformation and modernization to help build a moderately prosperous society.