China’s State Council has again sought to prod the country’s bureaucracy into action to cut costs for business, listing priorities for every major ministry.
Most of the measures in a roughly 10,000-character document released on Monday were not new but the list underscores the urgency of the push as growth in the economy continues to slow.
Beijing has made cost cutting a key policy goal to spur growth, with the finance ministry overhauling the tax system, the central bank reducing financing costs and the labour ministry lowering social pension payment obligations for business.
China Minsheng Bank chief economist Wen Bin said that despite early signs of improvement in industrial profits for big firms, overall downward pressures persisted.
“Companies, especially small and medium-sized ones, still have a strong need to cut costs,” Wen said.
Economic indicators showed growth continued to lose steam last month, with investment from private capital deteriorating, industrial production weakening and land costs rising.
Beijing’s other policy efforts to improve the economy through cutting leverage and shutting down excess capacity is also falling short.
In addition, Beijing said shifting from business taxes to value-added taxed could reduce the tax burden for business by 500 billion yuan (HK$583 billion) a year but national tax revenue is still growing faster than overall economic growth, reflecting a heavier tax burden.
Wen said some sectors such as consulting faced a higher tax burden after the tax regime change.
In terms of financing costs, the central bank has held off cutting interest rates, and last month’s data showed businesses repaid more than they borrowed from banks.
In a statement on Monday, the State Council urged its ministries to improve the business climate by cutting more taxes and fees, reducing bond-issuing and borrowing costs, and trimming power and gas expenses.
In one detailed instruction, it said transport fees should be cut from 4.9 per cent of the value of the cargo to 4.4 per cent.
The State Council also stipulated that pension contributions for businesses should be equivalent to no more than 20 per cent of an employee’s salary. And housing fund contributions by the employer should be no more than 12 per cent of a salary.