China slashes taxes, fees to shore up growth

Date : 2015-04-10  | From : Xinhua

The Chinese government announced a package of relief measures Wednesday to stimulate businesses and prop up the real economy against increasing downward pressure.

The State Council, China's cabinet, decided to cut industrial electricity prices and resource taxes on iron ore as well as eliminate "capricious" official fees for firms during a weekly executive meeting.

The move is the country's latest effort to tackle an economic slowdown amid concerns of a possible slip in the first quarter.

The price of power consumption for industrial and commercial purposes will be cut by about 1.8 yuan (around 0.3 U.S. dollars) per 100 kWh, favorable news for large energy consumers in nonferrous metals, steel, cement and chemicals.

"After the adjustment, business costs from electricity use will be reduced -- a boon to corporate profitability and healthy growth of the real economy," said Zhang Zhanbin, an economics professor from the Chinese Academy of Governance.

Analysts forecast firms will save more than 80 billion yuan this year under the new price.

China's total electricity consumption, considered an indicator of the economic climate, fell 6.3 percent from a year ago in February, dragging down the growth rate of the first two months to 2.5 percent and adding to worries about sagging industrial performance.

Ouyang Changyu, deputy secretary general of the China Electricity Council, predicted power use will increase 1 percent in the first quarter, short of previous market expectations of 2 percent.

Economic indicators on factory activity and foreign trade for January and February were also lackluster, fanning pessimism about the performance sheet of the world's second-largest economy for the first quarter, which is usually the weakest period of the year.

Policymakers have lowered the economic growth target for 2015 to around 7 percent after growth slowed to a 24-year low of 7.4 percent in 2014.

Major economic indicators, including GDP for the first quarter, are scheduled to be released by the National Bureau of Statistics on April 15.

A research note from the Chinese Academy of Social Sciences predicted growth in the first three months to slow to 6.85 percent year on year, adding that achieving the full-year target will be difficult.

Su Jian, an economics researcher at Peking University, said the lower growth goal for this year is achievable, but still needs policy stimulus.

Apart from easing measures, including widely anticipated interest rate and deposit reserve ratio cuts, more reform measures to build a better business environment and promote entrepreneurship are also on the way.

The State Council agreed to launch a six-month campaign to eliminate unreasonable administrative fees that force enterprises to pay for approvals, guild memberships and market access.

The resource tax on iron ore will be reduced from 80 percent of the tax payment base to 40 percent to help iron ore smelters that have suffered from sluggish prices and production since 2014.

In addition, China has strived to streamline administration and delegate powers, allowing easier market access and less governmental interference, and more efforts can be expected this year.

The number of newly registered firms reached 3.65 million in 2014, up 45.88 percent from a year ago, data from China's commerce regulator showed.

"While economic growth slowed, more jobs were created, which fully demonstrates both the tremendous power of reform and the endless potential of the market," said the government work report released in March.