Amid the steady economic recovery, China's renewal and implementation of a range of supportive tax and fee policies will further ease the burden on enterprises and benefit market entities to improve the business environment and boost growth confidence, making the country increasingly attractive to foreign investors, experts and business executives said.
Foreign enterprises are expected to expand funding into research and development in China as the country strengthens its support to innovation with long-term preferential tax policy arrangements, they said.
Zhu Zhongming, vice-minister of finance, said at a news conference on Friday that China will strengthen its fiscal policy assistance to boost growth this year, and will move steadily on delivering preferential tax and fee policies.
On March 24, the State Council executive meeting chaired by Premier Li Qiang decided that some temporary policies will be extended until the end of 2024. These include reductions to premiums for unemployment insurance and workers' compensation, and reductions to corporate income tax on annual taxable income up to 1 million yuan ($145,000) for micro and small enterprises and self-employed individuals.
Moreover, the meeting decided that the policy allowing enterprises entitled to the current additional pre-tax deduction ratio of 75 percent for R&D expenses to apply a ratio of 100 percent will continue as part of long-term institutional arrangements.
"Based on the experiences accumulated in the past three years, the extensions and adjustments of the preferential tax and fee policies are well-designed, and they have placed more emphasis on delivering targeted policy effects to boost innovation and expand market confidence," said Wang Wei, director-general and senior research fellow of the Institute of Market Economy, which is administered by the Development Research Center of the State Council.
"The policies are particular about supporting micro and small enterprises and individual businesses, as well as focus on promoting R&D and innovation, which is expected to increase confidence and vitality of various market entities," she said.
The newest round of tax policy extensions will lower taxpayers' burden by more than 480 billion yuan per year, according to the Ministry of Finance.
Shi Zhengwen, director of the Center for Research in Fiscal and Tax Law at the China University of Political Science and Law, predicts that the total tax cut this year will be up to 1 trillion yuan, together with the value-added tax exemption policy for small-scale taxpayers announced in January.
According to Shi, the long-term tax cut policies promoting R&D will, in particular, push domestic enterprises to innovate and increase China's self-reliance in science and technology. To some extent, foreign companies will benefit even more than domestic ones, which reflects the country's commitment to opening-up and leveling the playing field for foreign enterprises.
"Foreign investors, particularly those from developed economies, generally have high-quality technologies, and the tax cut policies will facilitate them to relocate more R&D centers to China, in order to make the most out of the China market as a source of innovations rather than just a production base," he said.
"Encouraging investment in scientific and technological innovations will be a key target of China's many policies, as the country undergoes economic upgrades and advances its high-quality development. Long-term institutional arrangements, such as the tax cut policy treating domestic and foreign enterprises equally this time, will stabilize foreign investors' confidence and willingness to keep increasing R&D investments in China," he added.
Foreign businesses share Shi's sentiments. Nicolas Poirot, president and CEO for the China unit of Air Liquide Group, a French industrial and medical gas supplier that runs 120 plants in the country, said that China's extending and improving a number of preferential tax and fee policies will surely boost confidence in the market and will bring opportunities for foreign companies' growth in the country.
With China reinforcing the synergy between monetary, industrial, technological and social policies to lead an overall economic upturn, Poirot said his company will promote the development of the entire industrial chain of the local hydrogen energy industry, actively share expertise in hydrogen production, transportation and storage technologies, and support local new forces in clean mobility in China this year.
"Relying on the local innovation ecosystem, we will strengthen exchanges with key technology sectors — such as nuclear fusion, aerospace, biological sample storage and energy shipping — and seek cooperation opportunities," he said.
Shi suggested furthering of personal income tax reforms to better serve high-end talent, along with other measures to add strength to innovation and high-quality development.