China Daily:

The 20th CPC National Congress proposed insisting on focusing on the real economy in terms of economic development and moving faster to boost China's strength in manufacturing. What has been the effect of preferential tax policies on the development of the manufacturing sector in recent years, and how will tax support help the manufacturing sector become stronger in the future? Thank you.

Cai Zili:

Thank you for your questions. Manufacturing is the foundation of the real economy and the lifeline of the Chinese economy. In recent years, the CPC Central Committee and the State Council have planned and implemented a series of tax refund and fee reduction measures, and the manufacturing sector has been the top priority for support. In particular, a series of major measures to ease the heavy burden of the manufacturing sector has been successfully launched. These measures include lowering the VAT rate in the manufacturing sector and other fields, taking the lead in increasing the tax deduction ratio for manufacturing R&D expenses and making greater efforts to increase VAT credit refunds in manufacturing. These measures have effectively supported the manufacturing sector in reducing operating pressure, enhancing innovation motivation, and unlocking development potential.

Data shows that tax support aimed at improving the manufacturing sector is quite strong. First, the scale of tax and fee reductions is the largest. Since 2018, the manufacturing sector has benefited the most, with a total of more than 3.5 trillion yuan in tax and fee reductions, and tax refunds and fee deferrals, meaning the manufacturing sector has enjoyed the most tax and fee cuts. Second, the tax burden has dropped the most. Tax and fee reduction policies have significantly reduced the tax burden on business operations. According to the data of key tax source enterprises monitored by the STA, the tax burden of manufacturing enterprises in 2022 decreased by 23.3% compared with 2017, and equipment manufacturing sector dropped by 29.5%, which is the largest decrease in taxes. Third, the boosting effect is more prominent. Under the joint effect of a series of tax and other supporting policies, the development of China's manufacturing industry has grown steadily. Tax data shows that from 2018 to 2022, manufacturing enterprises increased their sales revenue by an average of 9.4% annually. Of this, sales revenue of equipment manufacturing increased by an average of 10.3% annually. Purchases of smart, R&D and energy-saving equipment by the manufacturing sector increased by an average of 13.5% annually. In 2022, the added value of the national manufacturing industry accounted for 27.7% of GDP, an increase of 1.4 percentage points from 2020, showing continued momentum with steady progress and quality improvement.

Going forward, we will fully implement and constantly refine tax-and-fee policies in accordance with the plans and deployments of the CPC Central Committee and the State Council, further assist the high-quality development of the manufacturing sector, and strive to foster an enabling environment that is conducive to the development of advanced manufacturing. First, we ought to support manufacturing to become higher-end. We will promote the upgrading of manufacturing to become higher-end through the implementation and improvement of supporting policies such as preferential tax policies for high-tech enterprises and accelerated depreciation of newly purchased fixed assets in key manufacturing industries. Second, we need to help manufacturing become smarter. We will better leverage the role of policies of the additional tax deduction for R&D expenses and preferential tax policies for technology transfer, speed up the digital transformation of the manufacturing sector, realize the deep integration of digital technology, production, and business operations, and continuously improve the level of intelligence. Third, we need to guide manufacturing to become more eco-friendly. We will implement tax-and-fee policies such as corporate income tax exemptions for special equipment investment in environmental protection, energy and water conservation, and the comprehensive use of resources, etc., encourage manufacturing companies to reduce pollution and carbon emissions and become more eco-friendly, and further promote the green, low-carbon and high-quality development of China's manufacturing sector. Thank you.