Financial burdens for enterprises in China will be further reduced with the government’s decision to tighten regulation to eliminate fees improperly levied on businesses, promising easier operating conditions and extra room for innovation in the year ahead.
This was one of four decisions made at a State Council executive meeting on Feb 8, presided over by Premier Li Keqiang. Decisions also were made to help the construction industry with upgrades, promote high-quality farmland and improve pesticide management.
The State Council, often called China’s Cabinet, will work to further reduce business fees and charges nationwide through better supervision, officials said. This will include long-term measures to reduce administrative costs for enterprises, in addition to cutting out improperly charged fees, according to a statement released after the meeting.
Premier Li has repeatedly mentioned that government needs to devise effective ways to ensure the long-lasting reduction of administrative costs for businesses.
It was decided at the meeting that auditing and inspections will be used to reduce improper fees and charges. It also was decided that industry associations will be strictly prohibited from forcing enterprises to join and pay fees. Also, other agencies will not be allowed to charge fees based on their connections with governmental departments.
Since 2013, governments at all levels have been told to find ways to reduce extra charges on enterprises through limits on government-managed funds and administrative expenses.
The central government has removed 496 fees, while local governments canceled more than 600 fees, the statement said. Administrative fees and the proportion of social insurance paid by enterprises also have been gradually reduced since 2015. Officials say they hope to continue to encourage the expansion of businesses, as seen in the better than expected result of 51.3 in January’s purchasing managers index. The number is a measure of the health of manufacturing, and a PMI greater than 50 represents expansion.
Premier Li and the central government have been promoting business startups and entrepreneurship across the country. The State Administration for Industry and Commerce said in January that last year saw more than 16 million new business entities emerge, an increase of 11.6 percent, with 15,100 new businesses registered each day.
Cutting improper fees is in line with the administrative streamlining the central government has promoted, said Zhang Chunxiao, an economics researcher at the Chinese Academy of Governance.
Auditing and inspections are a must to ensure compliance, which will cut business costs and in turn drive innovation in technologies and business models, Zhang said.
“Taxation is not high in China, but these fees are true burdens for enterprises that have to pay extra for a number of approval processes. By reducing these fees, market potential can be unleashed and enterprises empowered to innovate and upgrade, which is crucial for supply-side structural reform,” Zhang added.