Ministries specify measures for supply-side reform in 2016

BEIJING - The year 2016 will see China support its economic growth through supply-side policies and measures, moving the model away from one that is reliant on the demand-side strategy of capital investment and exports.

The authorities vowed to reduce property inventory, cut corporate burden through tax breaks, eliminate outdated industrial production and modernize agriculture.

Confronted with lingering downward pressure, the supply side is heralded by many as having the power to sustain growth, as it will improve and increase the supply of goods and services, consequently lowering prices and boosting consumption.

Finance, taxation

Finance Minister Lou Jiwei, speaking on Monday, said reforms in finance and taxation will be prioritized, and the proactive fiscal policy will be improved.

With just four industries -- finance, construction, property and consumer services -- yet to see business tax replaced with VAT, 2016 will see the completion of this reform, with all sectors covered by year end.

This measure partly aims to alleviate the corporate tax burden. From 2012 to the first half of 2015, it has resulted in tax savings of over 484.8 billion yuan ($75 billion), accounting for 0.2 percent of GDP in the period, according to a report by China International Capital Corp. Ltd.

Individual income tax and consumption tax will also be reviewed, according to Lou.

Throughout 2016, and beyond, the proactive fiscal policy will persist and become more forceful. China will gradually raise the fiscal deficit ratio, issue more treasury bonds and limit for new local government debt.

The fiscal-deficit-to-GDP ratio was raised to 2.3 percent for 2015, compared with the 2014 target of 2.1 percent. Financial analysts believe that this will be further increased to 3 percent or higher in 2016 in an effort to shore up growth.

A 3-percent deficit ratio is normally considered the line that should not be crossed, but some favor a higher ratio as it enables the government to cut taxes, thus, encouraging production.

Destocking, urbanizing

At a work conference on Monday, the Ministry of Housing and Urban-Rural Development disclosed that the destocking of the property inventory will be a major task for 2016, with measures to regulate the property market and encourage real estate companies to merge and restructure on the horizon.