SCIO briefing on the 'new normal' in the Chinese economy and deepening supply-side structural reform

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Xu Shaoshi, minister of the National Development and Reform Commission (NDRC)

Hu Kaihong, director-general of the Press Bureau, State Council Information Office

Jan. 10, 2017


"Rising" might be one of the keywords for the Chinese economy in 2016. At the end of last year, comments by auto glass tycoon Cao Dewang generated much online discussion based on a belief that China's business tax rate was "deadly." This opinion actually reflects some worries of entrepreneurs, or even anxiety throughout society. Meanwhile, we have also witnessed that the central government attached much importance to cutting corporate costs and adopted a series of measures to reduce taxes, fees and other costs for companies in 2016. My question for Mr. Xu is: Why haven't these entrepreneurs got a sense of gain from the central government's policy? Is there something wrong here? Thank you!

Xu Shaoshi:

That has been quite a hot topic of late. There are also discussions about manufacturing costs and the tax burden in carrying on business in China. Besides Cao Dewang, some other entrepreneurs also complained about the transaction costs imposed by the government. I think these individual cases have their own level of uniqueness and we should not overreact. The Ministry of Finance and the State Administration of Taxation conducted an analysis and responded from the perspective of tax reforms and the level of tax burden respectively. They concluded that, in general, the country's macro tax burden is not heavy.

I largely agree with this opinion, and hold the same view as the Ministry of Finance and the State Administration of Taxation. I believe the domestic market is quite competitive and China is still one of the best countries in attracting foreign investment. We are very concerned about the demands of enterprises. For the past year, we have achieved positive results in reducing corporate costs through streamlining our administration and delegating power and reducing taxes, fees and other business costs. I haven't got the data for December, but statistics for the January-November period show industrial enterprises above designated size achieved a cost reduction of 0.14 yuan year-on-year for every 100 yuan of revenue from their main business operations, and the profit margin of their main business operations grew 0.26 percentage points than last year.

In 2016, we cut corporate costs by nearly 1 trillion yuan from the following aspects.

First, reducing taxes, fees and other costs for companies. During the past year, we have put in place a nation-wide reform to replace business tax with value-added tax, and hence achieved a business tax cut of 500 billion yuan. Moreover, we regulated administrative and service fees for import and export links and adjusted the pricing mechanism for bank card swipe fees. In this regard, the enterprises concerned gained a cost reduction of 56 billion yuan.

Second, enterprise energy costs have been reduced by about 200 billion yuan. This comprises a mix of electricity and natural gas costs. Electricity costs have been reduced by 100 billion yuan, The price of natural gas for non-residential use was reduced last year. Again, this created a reduction in business costs by about 100 billion yuan.

Third, the interest burden has been reduced. The interest on loans from January to November in 2016 was reduced by 78.7 billion yuan in total.

Fourth, logistics costs have been reduced by about 35 billion yuan through implementing the four major projects of dredging channels, linking transportation hubs, developing river-ocean combined transportation, and one-stop customs clearance and inspection. In 2016, a total of 13 administrative examinations and approvals were cancelled; 222 administrative licenses on vocational qualifications were cancelled, and 192 agency services approved by the State Council were regulated. The overall feedback from netizens has been positive.

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