China’s finance ministry is talking up tax breaks

China's finance ministry is talking up tax breaks

February 23, 2022: -China will cut taxes and fees on a grander scale this year while focusing on supporting the nation’s tech development, Finance Minister Liu Kun said Tuesday.

China’s economic growth slowed after a rebound from the initial shock of the coronavirus pandemic in early 2020. Analysts expect fiscal and monetary policy support this year.

The initial fiscal policy task is to cut taxes and fees by a grander scale than the previous year, Liu told reporters at a press conference, without specifying a figure. Those reductions totaled 1.1 trillion yuan ($173.5 billion) in 2021.

Liu’s second point was support for technological “self-reliance” and stable manufacturing supply chains. National expenditures on science and technology increase by 7.2% in 2021 to 970 billion yuan, he said, noting the funds supported the development of chips and new energy vehicles.

Escalating tensions with the U.S. have cut China off from suppliers of critical technologies and prompted Beijing to introduce policies to support homegrown tech. In the previous year, the central government announced it planned to increase spending on research and development by more than 7% a year amid 2021 and 2025.

“The Ministry of Finance sticks to the priority of ensuring the national development strategy of scientific and technological self-reliance and self-improvement,” vice-minister Yu Weiping told reporters in the same meeting in response to a question regarding the ministry’s work on tech. That’s according to a CNBC translation of the Chinese.

Yu said the central government surged the spending on basic research in the previous year by 15.3% to an unspecified amount, primarily to support work at state-run institutions.

He is claiming that in the first three quarters of 2021, businesses in China received 1.3 trillion yuan in additional deductions for research and development expenses and over 330 billion yuan in tax cuts.

During Tuesday’s press conference, the finance ministry officials emphasized support for small businesses, timely pension payments to retirees, and more significant gains from the central government to local governments.

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China’s finance ministry is talking up tax breaks