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SCIO briefing on government work report

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Beijing Youth Daily:

Under the impact of the COVID-19 epidemic, some macroeconomic policies introduced in the government work report last year were called unusual measures in unusual times. This year, we are carrying out regular epidemic controls, so what are your considerations in adjusting the macroeconomic policies? Thank you.

Sun Guojun:

Thank you for your question. The macro policies last year were formulated and implemented to meet the urgent needs of market entities. In terms of the targets and focuses of the macro policies this year, the Central Economic Work Conference held at the end of last year made clear plans for this year's economic work. The government work report implemented the guiding principles from the Central Economic Work Conference and made specific plans for macro policies. Generally speaking, we should ensure the continuity, consistency, and sustainability of macro policies this year, continue with and optimize the policy logic and focuses of last year, maintain necessary policy support, and avoid sharp turns in policy, so as to continue to ensure macro policies alleviate the difficulties of market entities.

This can be reflected in several aspects. For example, central and provincial-level governments will further increase funding allocations to prefecture- and county-level governments to assist local businesses and residents. The government work report highlights two notable increases. First is that the general transfer payments from the central government to local governments will be raised by 7.8% — which marks a significant increase over last year — while continued cuts will be made in central government expenditures. Second is the increased efforts to ensure employment, living standards and the operation of market entities at the grassroots level. This year, 2.8 trillion yuan of central government funding will be placed under the mechanism of directly allocating budgetary funds to prefecture- and county-level governments, meaning that financial resources will reach local governments more quickly. This year's government work report introduces many practical measures to ease the burden of market entities. Regarding tax cuts, for instance, we will continue to implement systematic tax cut policies, adjust and improve the temporary tax cut policies adopted last year, and extend the duration of some temporary policies. Meanwhile, we have introduced new policies for MSMEs, and policies granting extra tax deductions on R&D costs to encourage innovation. In addition, we will raise the VAT threshold for small-scale taxpayers from 100,000 yuan to 150,000 yuan in monthly sales, and halve the income tax of small and micro enterprises on annual taxable income below 1 million yuan, which are big discounts.

As for reducing enterprises' production and operating costs, we will cut the electricity rates for general industrial and commercial businesses, take firm measures to rectify irregular height and width limits and checkpoints that affect freight transportation, and lower the average broadband rates for small and medium-sized enterprises by an additional 10%. Many policies are aimed at MSMEs and self-employed individuals, which although they have seen improved operations, still face many difficulties. We need to provide more policy assistance to help them stand firm and achieve greater development. Thank you.