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Nation eyes policy moves to shore up economy

By OUYANG SHIJIA | CHINA DAILY | Updated: 2023-09-08 09:05
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This photo taken on Aug 24, 2023 shows the automated production of motor stator and rotor at a company in the Western Science city in southwest China's Chongqing municipality. [Photo/Xinhua]

Burdens on firms to be eased; tax cuts seen boosting income, consumption

China will further strengthen policy reserves and fully utilize policy space to ease burdens on enterprises and shore up economic growth amid downward pressures, officials said on Thursday.

Experts said a raft of recently announced policy measures, such as cutting stamp duty and personal income tax, will help stabilize market sentiment and spur economic activity, adding that China still has ample tools and available policy space to support its economy.

Wang Dongwei, vice-minister of finance, told a news conference in Beijing on Thursday that his ministry will ramp up efforts to better implement the existing policies on tax incentives, further study policy reserves, fully use policy space and take targeted measures to relieve burdens on market entities.

Notably, Wang said the recently announced additional deductions for individual income tax for those who are raising children or supporting the elderly, will further ease burdens on taxpayers, especially China's middle-income group, which will help increase disposable personal income and boost consumer spending.

Looking ahead, he said the ministry will work closely with relevant parties to study and improve the personal income tax system, in order to better adjust income distribution and improve people's livelihoods.

Li Chao, chief economist at Zheshang Securities, said the reductions in personal income tax will stabilize household incomes, thus helping expand domestic demand and spur consumption.

Citing a series of recently reduced taxes, Luo Tianshu, chief accountant of the State Taxation Administration, said the cuts are critical for promoting sustained economic development, strengthening internal driving forces and sustaining the improvement in market expectations.

China's tax and fee cuts as well as tax refunds and deferrals reached 1.05 trillion yuan ($143 billion) in the first seven months of this year, according to the STA.

The country's intensified policy efforts to alleviate the burden of enterprises have helped major industrial firms to narrow profit declines for the fifth consecutive month in July.

Data from the National Bureau of Statistics showed that industrial enterprises with annual revenue of at least 20 million yuan each saw their total profits drop by 6.7 percent year-on-year in July after an 8.3 percent decline in June.

For the January-July period, industrial firms' profits fell 15.5 percent year-on-year to 3.94 trillion yuan, narrowing from the 16.8 percent drop in the first half of this year, the bureau said.

While the industrial profits declined at a slower pace in July, Li from Zheshang Securities said the recovery is not yet solid as the insufficient demand is weighing on growth.

Li said he expects to see more fiscal policy support to ease operational burdens on the enterprises and improve corporate profitability, including further tax and fee reductions for the weak links and hard-hit sectors.

On the monetary front, Li said the People's Bank of China, the country's central bank, may implement a cut in the reserve requirement ratio in the near term.

In order to revive the economic recovery, the Ministry of Finance said it will also implement and improve the policies on stabilizing foreign trade and optimizing the development environment.

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