Provincial governments in China back local business with tax and fee cuts
Provincial governments across China are looking to boost their local economies by offering businesses a range of tax and fee cuts.
A number of provincial-level governments have released their budget reports for this year, pledging that both the effectiveness of their fiscal policy will be enhanced.
They say their expenditure will relieve some of the financial burdens on businesses, thus boosting consumption and stabilizing investment. The digital economy will receive priority treatment.
Zhejiang province’s budget report said that it will support key projects designed to increase consumer consumption, while Hunan province said in its report that fiscal support will be given to expanding domestic demand and boosting consumption, particularly upgrading housing, developing new energy vehicles and improving care services for elderly people.
Henan province said in its report that the local government will work harder to help businesses recovery from the difficulties in recovering from the effects of Covid and the global economic slowdown, working to lower operational costs for local firms.
Shanghai underlined in its report the importance of consolidating and expanding on last year’s tax and fee cuts. The metropolis will make such policy incentives more targeted at those in need.
In Guangdong province, Shenzhen has set a GDP growth target of 6% this year as it looks to consolidate cooperation with the Hong Kong Special Administrative Region.
City Mayor Qin Weizhong delivered the government work report at the annual session of the Shenzhen people’s congress, saying Shenzhen’s GDP in 2022 increased by 3.3% to a new high of 3.24 trillion yuan ($475 billion).
The report also states the total amount of imports and exports exceeded 3.7 trillion yuan last year, while export volume surged by 13.9%, keeping it top of the list of all mainland cities for the 30th consecutive year.
Shi Yinghua, a professor at the Chinese Academy of Fiscal Sciences, said: “Late last year, the central authorities have repeatedly reiterated the need to keep the necessary intensity in fiscal spending this year. In particular, the new round of continued tax and fee cuts, and optimization of the tax cuts structure from the local government level, reflect the stability and continuation of policy support to boost economic growth this year.
“This also partly reflects that more efforts will be made to improve fiscal structures to increase fiscal policy intensity and boost economic recovery this year,” Shi said, adding that fiscal policy will continue to play an important role in expanding investment and encouraging consumption, and that boosting growth will be the key priority this year.
Wu Qi, executive dean of the Wuxi Institute of Digital Economy, backed the local governments’ commitment to prioritise spending on the digital economy this year.
Wu said: “Industrial digitalization is important for growing the digital economy, yet the process usually means a considerable liquidity burden for small and medium-sized enterprises. Fiscal fund support in this process will not only help relieve their burden, but also contribute to the industrial upgrade this year and beyond.”
Economy set to grow by 5.7%
China’s economy is expected to grow by 5.7% in 2023, contributing to around 40% of the global economic growth, Robin Xing, Morgan Stanley’s chief China economist, has predicted.
He said the world’s second-largest economy will play a key role in boosting global economic growth this year, and China’s growth prospects will have positive impact on other economies in areas like trade and tourism.
“Both the United States and Europe may face a year of subdued growth, and China, with an anticipated 5.7% growth in 2023, will benefit them a lot,” Xing said.
He said Europe will benefit from the growing demand for medium to high-end luxury goods in the China market, and Chinese outbound tourism spending will be beneficial for many economies and sectors, especially in Asia.
