China will scale up tax and fee cuts next year to support struggling businesses, after reducing an estimated 1 trillion yuan ($156.9 billion) worth of taxes and fees for the whole of 2021, the Ministry of Finance said on Monday.
Experts said further reducing corporate tax burdens is expected to play a critical role in helping the economy withstand short-term downward pressure and beefing up long-term growth impetus.
"We will implement tax and fee cuts at a greater intensity to vitalize market players," the ministry said in a statement on Monday after concluding a meeting that mapped out priorities for fiscal authorities in 2022.
The ministry will step up policy support for hard-hit smaller businesses, grant rewards to demonstration areas utilizing inclusive finance, and support a new array of "little giants", or leading small and medium-sized enterprises that specialize in niche sectors and boast core technologies, according to the statement.
Official data showed that China's tax and fee cuts totaled 910.1 billion yuan during the first three quarters. The statement said the number is expected to reach 1 trillion yuan for the full year.
Wu Chaoming, chief economist at Chasing Securities, said a larger scale of tax reductions will help manufacturers and smaller businesses withstand potential cash flow risks and foster new impetus of economic growth with targeted policy focuses on the manufacturing sector.
"Greater policy support is necessary to sustain the recovery of medium, small and micro-sized enterprises, sole proprietorships and manufacturers," Wu said, adding that they have been under pressure from COVID-19 uncertainties, elevated raw material prices and shrinking market demand.
The ministry also pledged in the statement that it will ensure a proper intensity of fiscal expenditure, accelerate the pace of spending and optimize spending structure to safeguard the financing of national strategic tasks.
Efforts will also be strengthened to make a good use of local government special bonds, support in-advance infrastructure investments, improve the structure of income distribution and resolve the risks of local government implicit debts, the statement said.
The statement came amid a growing number of policy signals that China will ramp up fiscal support for the economy in the coming year, especially when it comes to helping out struggling businesses, expanding domestic demand and facilitating industrial upgrades.
The Central Economic Work Conference, an annual meeting that has set out China's economic policy agenda for 2022, acknowledged that the country is facing threefold pressure from demand contraction, supply shocks and weaker expectations and required actions to safeguard macroeconomic stability.
A State Council executive meeting decided earlier this month to give priority to manufacturing firms when implementing tax and fee cuts and will increase the additional tax deductions of research and development expenditures to boost technological innovation and industrial upgrades.
The ministry statement also said that China has reduced its overall tariff level to 7.4 percent this year. Looking into 2022, the ministry will further deepen international economic cooperation, engage more in major global issues and support high-quality development under the Belt and Road Initiative framework.