Li Lan, DRC

2017-3-13

High cost is still the top barrier hindering business operation. The current economic performance is facing a downturn pressure, with difficulties increasing in some industries and regions. Among all difficulties, high cost has become one of the major problems facing the operation of Chinese enterprises and an important factor restricting the transformation and upgrading of these enterprises.

Practical measures are required to be implemented to reduce costs. The relevant government departments need to take measures to reduce the costs of enterprises, so that the entrepreneurs’ confidence and development momentum can be boosted, and ultimately the enthusiasm of entrepreneurs to make investment in industries will be motivated. The specific policy options are as follows. 1. We need to speed up the reform of the government administrative system, and reduce the institutional transaction costs of physical enterprises by further streamlining administrative approvals and delegating more power to lower level governments, relaxing market entry regulation with administrative monopoly by nature, and fully implementing major reform measures including negative list management model. 2. We need to continue to promote structural tax and fee cuts so as to further reduce the burden of corporate tax, implement structural tax cuts towards physical enterprises, and promote the reform of tax system. 3. Various measures need to be taken across the board to reduce the labor cost of enterprises. The social security burden and labor costs of enterprises should be reduced through the improvement of rate base and payment adjustment mechanism and the combination of fixed radix and reduction of rate. 4. The financial system reform needs to be comprehensively promoted, and corporate financing costs should be reduced. The management of interbank business, wealth management and shadow banking needs to be strengthened, and the cross-sector operation of the banking system needs to be speeded up. 5. The reform of trade circulation system should be expedited and the logistics costs of enterprises should be reduced. 6. Effective measures should be taken to promote the market-oriented reform of energy price formation mechanism and to reduce energy costs for enterprises.