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Guangdong Issues Work Plan for Reducing Costs for Enterprises

The Guangdong provincial government recently issued a circular on the work plan for reducing the costs of real-economy enterprises (see circular in Chinese). The objective is to help enterprises reduce their annual burdens by RMB200 billion on average in one to two years. The overall costs of real-economy enterprises will be reasonably reduced in about three years while their profitability will improve markedly.

The new regulations will reduce the costs of real-economy enterprises in the following respects:

Reducing tax burdens: The pilot programme for replacing business tax with value-added tax will be launched in full to ensure that the tax burdens of all sectors will only drop, not increase. Measures for reviewing and regulating administrative charges will be implemented, and enterprise-related administrative charges levied by the provincial government will be waived. Financing costs will be effectively reduced by gradually lowering the level of burdens borne by enterprises in taking loans or issuing bonds and reducing the ratio of intermediary financing fees in the financing costs of enterprises to a reasonable level. In terms of institutional transaction costs, efforts will be made to streamline administration and delegate power to lower levels, establish a business environment that facilitates investment, and greatly reduce pre-entrance intermediary services in administrative approval.

Keeping tabs on wage growth: The ratio of enterprise contributions to social security will be lowered. Efforts will be made to fulfil the state’s requirement to reduce the ratio of enterprise contributions to social security and explore ways to gradually reduce the ratio of enterprise contributions to employees’ basic old-age insurance to 14% and maintain the ratio of its unemployment insurance premium payment to 1%, with the rate of contributions by employees remaining at 0.2%.

Slowing down the pace of statutory minimum wage (SMW) adjustment: The existing practice of adjusting the SMW at least once every two years will in principle be changed to at least once every three years. The SMW rate announced in May 2015 will continue to be in force in 2017.

Further reducing energy and land use costs: The degree of marketisation of electricity and gas prices for enterprises will be significantly raised. Electricity price for industry and commerce will be reasonably reduced and the land supply system will be further improved.

Substantially reducing logistics costs: By the end of the 13th Five-Year Plan period (2016-2020), the ratio of total logistics costs in GDP will be reduced to about 14.5% from 15% in 2015 and the ability of the logistics sector to support the national economy will be further enhanced.

Content provided by Picture: HKTDC Research
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