China's continued tax, fee cuts bolster business confidence

Tax payers get tax refunds for small and micro enterprises in Tianjin, north China, April 1, 2022. [Xinhua]

BEIJING -- Chinese enterprises are more vigorously making investments and expanding production thanks in part to intensified government efforts to ease business burdens and spur market vitality.

"We have stronger confidence in this year's development," said Li Chenghong, legal representative of a small manufacturer in east China's Jiangxi Province.

Hit by shrinking market demand, the metal processing and machinery company faced what Li described as "the hardest time for its survival" last year, but a 201,700-yuan (nearly 30,000 U.S. dollars) tax reduction allowed it to weather the hardship and regain a chance to thrive.

China has briskly promoted a mass tax relief campaign. The cuts and deferrals of taxes and fees, as well as tax refunds, exceeded 4.2 trillion yuan in 2022, the highest in recent years.

In March 2023, the central government decided to extend an array of favorable tax policies, including the one that benefited Li's company, a 2.5-percent preferential rate for taxable incomes below 1 million yuan. Micro and small firms, self-employed households, and innovation-focused companies will be the biggest beneficiaries.

As the economic environment remains challenging for businesses, the policy support will help risk-prone small market players hold steady, ensure stable employment, and prop up the economy, said Li Xuhong, a researcher with the Beijing National Accounting Institute.

Wang Daoshu, deputy head of the State Taxation Administration, has predicted that the measures will reduce the burden on enterprises by another 1.8 trillion yuan this year.

The strengthened government support has improved the performance of businesses and greatly bolstered their confidence.

According to the China Association of Small and Medium Enterprises, its index on the development of small and medium-sized enterprises registered the largest increase since the fourth quarter of 2020 to 89.3 in the first three months this year, with business confidence up significantly.

The official purchasing managers' index also showed that the index for business expectations stood at a highly positive 55.5 in March.

China will implement more concrete measures to further support businesses and unleash market vitality, Luo Wen, head of the State Administration for Market Regulation, said Thursday, citing efforts to deepen reform of market regulation and create an inclusive and level playing field.

He assured that the market entry and exit system will be improved, that unified, standardized, fair, and transparent regulatory rules will be established, and that institutional transaction costs for business entities will be further reduced.

These continued, stable policies are crucial to building up market expectations and confidence and more targeted and effective policies will ensure steady growth of enterprises, said Wang Zecai, a researcher with the Chinese Academy of Fiscal Sciences.