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China Issues Plans to Cut Costs for Real-economy Enterprises

The State Council has recently published work plans to cut costs for enterprises in the real economy sector.

According to the plans, initial reduction should be made after one to two years, and enterprises should find themselves in a better position to make profits thanks to reasonable cuts in overall costs in about three years’ time.

The main measures include:

1. Ease the tax burden to a reasonable level by means of expanding the pilot of replacing business tax with value-added tax, and cleaning up and regulating administrative charges concerning enterprises.

2. Effectively reduce financing costs by lowering the interest burden in corporate loans and bonds in stages, as well as the share of the costs of intermediaries in corporate financing costs to a reasonable level.

3. Significantly reduce the institutional transaction costs by streamlining administration to further improve the business environment, and simplifying intermediary service items in administrative approval procedures.

4. Control the rising labour costs to a reasonable level. Maintaining a reasonable wage growth, and reducing the share of enterprise contributions to social security and housing funds in total wages to a reasonable level.

5. Further reduce energy costs. Market forces play a bigger role in pricing mechanisms for enterprise consumption of energy and gas.

6. Significantly reduce logistics costs. The share of social logistics costs in the total value of social logistics is to be cut by 0.5 percentage points from the current 4.9%, and logistics costs for industrial and commercial enterprises reduced by about one percentage point from 8.3%.

For details of the work plans in Chinese, please see:

http://www.gov.cn/zhengce/content/2016-08/22/content_5101282.htm

Content provided by Picture: HKTDC Research
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