Opinion | China’s action on corporate costs shows commitment to reform
Analysts see State Council’s drive to ease companies’ financial burdens as a step toward reigniting mainland growth
A raft of new government measures aimed at stimulating China’s economic growth by reducing costs for companies signals a commitment to “meaningful” private sector reforms, according to analysts.
The plans, announced August 22 by the State Council, include reducing corporations’ annual tax bills by more than 500 billion yuan, lowering utilities and logistics costs for industrial companies and raising credit support to smaller firms.
Heavily indebted companies will be encouraged to enter debt-to-equity agreements with creditors and banks will be supported in replenishing capital and writing off bad loans in a timely manner. Companies with a good credit record will be encouraged to sell bonds overseas.
“The policy measures are not entirely new but are an added signal of commitment to define, refine and carry out private sector reforms in a meaningful way,” said Christy Tan, head of markets strategy at National Australia Bank, in an August 29 report entitled Essential Asia.
“Downside risks to growth have finally triggered some action from China’s central government. The calls for growth-supportive fiscal measures have gone on for a while and we have been saying that after the slew of monetary easing, the central bank has been seeking complementary measures from the government.”
The cost cut now looks very urgent for Chinese companies
Shen Jianguang, chief Asia economist for Mizuho Securities Asia in Hong Kong, said the new policy drive shows the Chinese government is determined to alleviate the corporate sector’s financial burdens.