Tax reductions aim to boost service trade

China will seek to increase the service and merchandise trade by increasing accessibility and providing tax cuts for technology providers, a State Council executive meeting decided on Sunday.

Further opening up the service market and developing the service trade despite the "complex and challenging global economic situation" was one of the main items on the agenda.

The first State Council executive meeting after the Spring Festival holiday was presided over by Premier Li Keqiang. Such meetings are usually held on Wednesdays.

Sunday's decision was made against the backdrop of China's imports and exports of merchandise encountering a bottleneck last year due to weakening export demand and rising domestic wages.

Many foreign enterprises, especially in various service industries, are striving for greater access to the Chinese market.

The meeting also decided that quickening development of the service trade can help China to generate new GDP growth and employment at a time when the country is ready to close a number of companies with excessive capacity, particularly those in the steel and coal industries.

Pilot programs are to be launched in 10 places along with five national-level new investment areas providing greater access and convenience to overseas companies, more flexible administration and diverse development models, the meeting decided.

The cities chosen for the pilot programs are Shanghai, Tianjin, Shenzhen, Guangzhou, Hangzhou, Suzhou, Wuhan, Chengdu and Weihai.

The national-level investment areas are Harbin in Heilongjiang province, Jiangbei (Nanjing), Liangjiang (Chongqing), Guiyang-Anshun (Guizhou), and Xi'an-Xianyang (Shaanxi).

The pilot programs will run for the next two years. Tailor-made policies are to be introduced to match the changes that the programs will bring, the meeting decided.

These matching policies will fall into three categories. First, a tax cut will be awarded to service companies with advanced technologies - with the tax level falling from 25 percent to about 15 percent.

Second, the government will set up a fund to guide innovation in the service trade, especially that of small and medium-sized enterprises based on the areas where the pilot programs are introduced.

Financial subsidies will be granted for the research and development that is needed urgently by the domestic market and for environmental protection services.

Third, the government will encourage financial institutions to expand their services to service firms.

Lin Lei, a researcher at the Center for Innovation and Development at the Chinese National Academy of Sciences, said the government's efforts to open access for the service industry "come at the right time".

"China's service industry has grown so rapidly over the past decade that it is able to accommodate more competition," he said.

Sunday's meeting also discussed innovation and upgrades for the medical and pharmaceutical industries and the development of Traditional Chinese Medicine.

zhangyue@chinadaily.com.cn