Fiscal policy focuses on expanding investment and promoting consumption.
Recently, the central government has repeatedly stressed that the effectiveness of policies should be fully released to accelerate the expansion of effective demand. What is the current domestic effective demand? How to comprehensively implement policies to expand effective demand?
Faced with the problem of insufficient demand, how to exert macro-policies has attracted much attention. Politburo meeting of the Chinese Communist Party, held at the end of July this year, demanded that macro policies should be active in expanding demand.
In terms of fiscal policy, since the beginning of this year, special bonds, large-scale tax rebates and other policy tools have played an important role. Recently, the executive meeting of the State Council has made continuous arrangements to fully release the effectiveness of policies, accelerate the expansion of effective demand, and promote investment with consumption to increase employment.
Make good use of special debt limit
The the State Council executive meeting held on August 31st emphasized that "at the critical juncture of economic recovery, it is very important to speed up the effectiveness of the release policy".
"Politburo meeting of the Chinese Communist Party and the recent the State Council executive meeting have deployed relevant measures to increase fiscal policy to support the real economy and stabilize aggregate demand, including making full use of special debt balance limits, stimulating infrastructure and stimulating consumption." Luo Zhiheng, chief economist of Yuekai Securities and president of the research institute, believes that from the macro perspective, a series of deployments are mainly intended to promote the recovery of demand as soon as possible, stabilize the economic market and promote employment stability.
Special bonds play an important role in stimulating effective investment and stabilizing macroeconomic operation. Statistics show that by the end of August, a total of 3.52 trillion yuan of special bonds had been issued, and the amount used for project construction has basically been issued, much ahead of previous years. At the same time, new infrastructure and new energy projects will be included in the key support scope of special bonds, so as to give full play to the role of special bonds in promoting the expansion of effective investment.
The effect of special bonds in stimulating investment is obvious. In the first seven months of this year, various localities have arranged more than 250 billion yuan of special bond funds for major projects such as railways, toll roads, trunk airports, etc., and actively played the role of instigating government investment.
On August 24th, the the State Council executive meeting made arrangements to make good use of the local balance limit of more than 500 billion yuan of special bonds in accordance with the law, and the issuance was completed before the end of October.
Li Xuhong, director of the Institute of Finance and Taxation Policy and Application of Beijing National Accounting Institute, believes that there is a great potential for investment demand in China at present. As a positive fiscal policy, special bonds will play a leading role in investment and effectively mobilize the enthusiasm of social investment. "In the second half of the year, local governments should revitalize the quota space of local special debts according to law, continue to promote investment in infrastructure construction, and give play to the multiplier effect of government investment to expand reproduction and expand new investment space." Li Xuhong said.
"This year, affected by the real estate market, the income from land transfer has also been affected, and the overall financial pressure is greater than in previous years. Using the special debt limit can appropriately alleviate the financial pressure in some areas and promote infrastructure. However, it should be noted that the geographical distribution of the difference between the limit and the balance of special debt is not balanced. To play a role, it is necessary to make great efforts in project reserve and screening. " Luo Zhiheng said.
Promote enterprises to expand investment.
Although the epidemic has had a great impact on the market in recent years, the workshop of Zhejiang Xinjin Air Conditioning Equipment Co., Ltd. is still producing at full capacity, and the products continue to sell well. Fan Aisong, the person in charge of the company, said that through digital transformation, the company has realized the supervision of the whole process of product production and opened up a new world in the market.
Behind the enterprise’s full efforts to carry out scientific research and development and investment, the tax preferential policy dividend is indispensable. "This year alone, the company received more than 3 million yuan in tax refund for retention and export, which provided strong support for enterprises to expand their scale." Fan Aisong said that the company will use this fund to introduce new energy fully automatic valve production lines and strive to build a leading manufacturer of air conditioning assemblies for new energy vehicles in the industry.
Since the beginning of this year, China has implemented a new combined tax and fee support policy, such as a large-scale value-added tax refund policy, which has effectively helped enterprises to solve problems. Statistics show that as of August 31, the cumulative increase in tax reduction and fee reduction and tax refund and tax deferral in China exceeded 3.3 trillion yuan. Among them, from April 1st to August 31st, the large-scale VAT tax refund policy was implemented, and 2,049 billion yuan of tax refund has been returned to the taxpayer’s account. Together with the 123.3 billion yuan of the previous tax refund policy, a total of 2,172.3 billion yuan of tax refund has been returned to the taxpayer’s account.
Policies such as large-scale value-added tax refund have played an active role in effectively guiding social expectations, stimulating the vitality of market players and helping to stabilize the macro-economic market. At the same time, it will send "real money and silver" to enterprises, so that enterprises can have more investment motivation. According to the data of the VAT invoice, in the second quarter, the equipment investment of manufacturing enterprises that applied for tax refund increased by 11.9% year-on-year, which was 9.5 percentage points higher than that of enterprises without tax refund.
Li Xuhong analyzed that a series of combined tax and fee support policies have many types, large scale and wide coverage, which have effectively played the role of countercyclical adjustment and increased corporate cash flow, which is conducive to opening up corporate capital blocking points, stimulating corporate investment demand and enhancing market participants’ investment expectations.
In addition to the value-added tax deduction, this year’s combined tax and fee support policy also includes increasing the deduction ratio of R&D expenses of small and medium-sized science and technology enterprises to 100%, exempting small-scale taxpayers from value-added tax in stages, continuing to implement tax reduction and fee reduction policies to support manufacturing, small and micro enterprises and individual industrial and commercial households, and gradually delaying social security fees to expand the scope. It is estimated that the annual tax refund and tax reduction will be about 2.64 trillion yuan.
Recently, the Ministry of Finance issued the Report on the Implementation of China’s Fiscal Policy in the First Half of 2022. When looking forward to the fiscal policy in the second half of the year, it was clearly proposed to continue to implement various combined tax and fee support policies and continuously release policy dividends.
"In the next stage, the tax and fee support policy will further improve the accuracy of support, continue to help market players to bail out development, and the driving effect on enterprises to expand investment will be more obvious." Li Xuhong said.
Enhance residents’ consumption power
500,000 yuan in April, 800,000 yuan in May, 960,000 yuan in June and 1.1 million yuan in July … In recent months, the turnover of Donghua Hotel in Luoyang, Henan Province, a century-old shop, has gradually increased.
"This year, we enjoyed a series of preferential tax policies, such as property tax and land use tax reduction, as well as value-added tax plus deduction, which effectively reduced the operating pressure, and then carried out various preferential activities, such as recharging packages and sending cash coupons to stores, which stimulated the enthusiasm of consumers and the business situation obviously picked up." Gu Gang, deputy general manager of the restaurant, said.
The implementation of the combined tax and fee support policy will promote the development of enterprises’ bail-out on the one hand and promote residents’ consumption on the other. Statistics in State Taxation Administration of The People’s Republic of China show that as of July 20th, tax reduction and fee reduction and tax refund and tax deferral in difficult industries such as retail, catering, tourism, transportation, etc. which are greatly affected by the epidemic have increased by 542.8 billion yuan. According to the data of VAT invoice, the sales revenue of wholesale and retail, accommodation and catering industry and transportation industry in June increased by 7.5, 19.1 and 5.8 percentage points respectively compared with May.
At the same time, the tax policy also strongly supports the steady increase of mass consumption such as automobiles, boosting the release of domestic demand potential. At the end of May, the State Council made it clear that the purchase tax on some passenger cars would be reduced by stages. For passenger cars with a displacement of 2.0 liters or less whose purchase date is from June 1 to December 31, 2022 and the bicycle price does not exceed 300,000 yuan, the vehicle purchase tax will be reduced by half to boost automobile consumption. This policy is expected to reduce the tax by 60 billion yuan.
The exemption of new energy vehicles from vehicle purchase tax policy also attracts consumers’ attention and stimulates the consumption potential of new energy vehicles. The reporter learned from State Taxation Administration of The People’s Republic of China that from January to July this year, new energy vehicles were exempted from vehicle purchase tax of 40.68 billion yuan, up 108.5% year-on-year, of which 7.17 billion yuan was exempted from vehicle purchase tax in July, up 119.1% year-on-year. According to the data of China Association of Automobile Manufacturers, from January to July this year, the sales volume of new energy vehicles reached 3.194 million, a year-on-year increase of 1.2 times.
On August 18th, the executive meeting of the State Council decided to continue to implement the vehicle purchase tax exemption policy for new energy vehicles until the end of 2023. This is the third time that China has continued to implement the tax exemption policy for new energy vehicles since it was first implemented in 2014. It is estimated that the tax exemption will be increased by 100 billion yuan.
"Compared with the same period of last year, the sales revenue of our company’s new energy vehicles has increased by over 40 million yuan this year, with a year-on-year increase of nearly 120%. The continued implementation of preferential tax policies has injected new impetus into the market." Li Xuemei, the person in charge of Hengsi Automobile Sales Co., Ltd. in Suining City, Sichuan Province, said that some hot-selling new energy vehicles have even been pre-ordered for delivery, and more than 100 vehicles have been booked in early August alone. The sales volume of the traditional gold consumption season in the automobile market is expected to maintain rapid growth in September.
"In the next step, we should continue to do a good job in promoting investment and promoting the implementation of consumption fiscal policies, and form a joint force of diversified fiscal policies. Strengthen the linkage between fiscal and monetary policies, support the implementation of policy-oriented development financial instruments, make up for the current lack of investment and consumer demand, and achieve the comprehensive effect of expanding effective investment, driving employment and promoting consumption. " Li Xuhong said. (Reporter Zeng Jinhua)