New round of fiscal policies to launch,100-bln-yuan PPP fund may establish

The Ministry of Finance (MOF) recently declared that to achieve annual target of economic growth, the MOF will implement more accurate and effective targeted and discretionary regulation, speed up in implementing and improving expansive fiscal policies and relevant measures as well as conduct timely preemptive adjustments and fine-tuning adjustments. Analysts believe that there will be large operation room for fiscal policies in the future. A new round of policies, including establishing 100-billion-yuan public-private-partnerships (PPP) guidance fund, supporting small and micro businesses by increasing efforts in tax and fees reduction, might be launched soon.

PPP mode to focused

The MOF makes it explicit to quicken the promotion of PPP mode. Legal systems and policy support system will be further improved, and a domestic PPP guidance fund will be established as soon as possible. Yang Tao, analyst of Essence Securities Co., Ltd., holds that promoting PPP mode can not only stabilize growth but also facilitate reform and PPP mode will be the focus of policies in the future.

Yang indicates that the MOF will establish a domestic PPP guidance fund later which is expected to reach 10 billion yuan. In addition, the MOF will also map out fiscal management methods for PPP projects, distribute cost-effective assessment guidance and prepare legislation for PPP. The MOF is selecting the second batch of demonstration projects. The review standard is expected to be even stricter than the selection of the first batch. “PPP projects are expected to see accelerated implementation in the second half of this year. Enterprises might see more PPP orders.”

Many analysts believe that at present, the implementation effect of PPP mode is not completely unveiled yet. The attractiveness of the projects and the cooperation among government and enterprises must be further improved to enhance the implementation effect of PPP. The National Development and Reform Commission (NDRC) intensively launched around 290-billion-yuan infrastructure projects to facilitate stabilizing investment, but actual implementation might be impeded by capital. The limit on capital is mainly affected by local governmental financial resources and banks’ willingness in lending.

Efforts on reducing tax and fees to increase

The MOF makes it explicit that it will increase efforts in reducing tax and fees. The annual taxable income of small and micro businesses allowed to reduce half of income tax is lifted from within 200,000 yuan to within 300,000 yuan.

 “Under current economic downward pressure, structural tax reduction and overall reduction of fees are also important parts of fiscal policies targeting stable growth”, indicated Liu Shangxi, director of the Research Institute for Fiscal Science of the MOF. Reduction of tax and fees will further boost the enthusiasm in popular entrepreneurship and innovation and intensify the internal impetus of economic growth.

Seen from the data released in the first half year, along with the increasing policies launched on tax reduction, small and micro businesses gain more and more benefit. The data released by the State Administration of Taxation shows that 2.39 million taxpayers nationwide benefited from the favorable income tax for small and micro businesses in the first half year, totaling a tax reduction of 8,654 million yuan.

As an important measure by this government in deeply promoting streamlining administration and power delegation, combination of “de-regulation and regulation” as well as function transformation, the reform on clearing fees also eases burden on residents and enterprises. The central government has totally cancelled, terminated and reduced 420 collections of administrative charges and governmental funds. A burden around 92 billion yuan on enterprises and individuals can be reduced every year.

Zhang Gang, chief strategy analyst of Southwest Securities Co., Ltd. (600369.SH), believes that current fiscal policies mainly focuses on easing burden, especially the burden on small and micro businesses as well industries supported by policies, such as environmental protection, new energy areas. Another focus of fiscal policies is on added-value. Improving the industrial quality in China’s western regions is of great concern to the economy.