Effectively promote the reduction of costs and increase the momentum of the real economy - Interpretation of the "Notice on Key Work for Cost Reduction in 2021"

(Source: National Development and Reform Commission, Author: Wu Xiaohua)

Recently, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, and the People's Bank of China jointly issued the "Notice on Doing a Good Job in Key Work to Reduce Costs in 2021," proposing 19 key tasks in 8 areas for the inter-ministerial joint meeting on reducing costs for real economy enterprises in 2021. This is an important measure to deeply implement the spirit of the Central Economic Work Conference and the deployment of the "Government Work Report," as well as a powerful tool to deepen supply-side structural reform, stimulate the vitality of market entities, and promote the quality and efficiency of the economy.

I. Accurately Grasp the Scientific Connotation of Reducing Costs

　　Currently, China's economy is evolving towards a higher level of form, more complex division of labor, and more reasonable structure. Revitalizing the real economy is an important measure to accelerate economic transformation and development. The cost issue of the real economy has become an important factor affecting the steady and healthy development of the economy. Reducing costs in the real economy is an important part of deepening supply-side structural reform, which involves benefiting the real economy, reducing institutional transaction costs, and promoting technological progress.

　　First, benefit the real economy. Reducing costs for real economy enterprises means benefiting the real economy and enterprises, further increasing their share in national income distribution, allowing a wide range of market entities to truly feel the tangible benefits of cost reduction policies. Reducing tax burdens is the government benefiting enterprises, exchanging a reduction in government revenue for an increase in enterprise benefits and a multiplication of market vitality. Reducing financing costs is the financial sector benefiting the real economy, effectively improving the efficiency of financial resource allocation, and achieving a virtuous interaction between finance and the real economy. Reducing electricity costs is the power companies benefiting electricity-using enterprises, further lowering energy costs for enterprises and increasing their operational efficiency.

　　Second, reduce institutional transaction costs. Transaction costs can be divided into market-type transaction costs, management-type transaction costs, and administrative-type transaction costs based on the scope and subjects of transactions. Currently, the reforms being promoted in China, such as streamlining administration and delegating power, combining regulation and service, optimizing services, and improving the modern market system, can all reduce administrative-type transaction costs. Accelerating the establishment of competitive factor markets and modern circulation systems, establishing a social credit system, and improving contract performance supervision mechanisms can all reduce market-type transaction costs. Deepening state-owned enterprise reform and improving the competitive policy system can reduce both market-type and management-type transaction costs.

　　Third, promote technological progress. In recent years, the role of introduced technology in promoting technological progress in China has gradually diminished, while the role of domestic independent research and development has been increasingly prominent. Cost reduction policies have increased profits for enterprises, and a significant portion of the increased profits has been used by enterprises for technological research and development, providing space for enterprises to accelerate transformation and upgrading, effectively promoting the improvement of product technological content and added value.

II. Deeply Implement the Overall Requirements for Cost Reduction

　　The complexity and diversity of the composition of enterprise costs, as well as the systematic and interrelated factors involved in cost reduction, determine the long-term and arduous nature of the work to reduce costs for real economy enterprises, which must be steadily advanced according to the overall requirements for cost reduction.

　　First, streamline relationships and focus on breakthroughs. It is necessary to comprehensively and deeply analyze various factors affecting enterprise costs, accelerate the resolution of long-term contradictions in cost-profit and income distribution relationships, and also focus on the current major contradiction of high tax and financing costs in enterprise costs, promoting the government to benefit enterprises and the financial sector to benefit the real economy.

　　Second, market determines, government promotes. It is necessary to fully recognize that whether costs are reasonable is mainly determined by the market. Some costs, such as labor costs and environmental governance costs, are an inevitable trend; it is also necessary to establish the concept of "letting water nourish fish," promoting government departments to delegate power and benefit, helping enterprises to lighten their burdens.

　　Third, policy guidance, enterprise leadership. It is necessary to accelerate the introduction of policy measures to reduce costs for real economy enterprises, creating a good external environment for enterprise development; it is also necessary to leverage the subjective initiative of enterprises, guiding them to improve technology, processes, and management levels, and enhance market competitiveness.

　　Fourth, based on the current situation, plan for the long term. It is necessary to accelerate the guidance of rapid reductions in costs such as taxes, financing, and social security contributions based on the spatial distribution and temporal characteristics of the decline in costs for real economy enterprises; it is also necessary to accelerate the advancement of reforms in fiscal, financial, and social security fields, focusing on resolving institutional and mechanism contradictions.

　　Fifth, classify policies and promote horizontal and vertical interactions. It is necessary to unify the introduction of policies that capture the policy and institutional factors affecting enterprise costs; it is also necessary to formulate targeted and operable policy measures for different regions and industries based on the direction of industrial structure adjustment and optimization in China and the characteristics of different costs.

III. Focus on Implementing Key Tasks for Cost Reduction

　　Since 2016, in accordance with the decisions and deployments of the Party Central Committee and the State Council, the National Development and Reform Commission and other departments have introduced a large number of practical and effective policy measures, promoting significant results in cost reduction work. In 2021, relevant departments will continue to focus on promoting a series of new cost reduction policy measures to achieve tangible results.

　　First, continue to reasonably reduce tax burdens. Further optimize tax reduction policies, continue to implement institutional tax reduction policies, and implement new structural tax reduction measures. Standardize the reduction of enterprise-related charges in key areas, continue to carry out broadband and dedicated line speed-up benefits for enterprises, clean up and standardize charges in urban water, electricity, gas, and heating industries, and improve the quality and efficiency of the supply of products and services such as water, electricity, gas, and heating. Implement and detail the benefits of tax reduction and fee reduction, continuously optimize tax payment services, resolutely not collect excessive taxes and fees, and firmly prevent the concentration of tax collection and random charges from undermining policy benefits, while continuously increasing the rectification of various illegal enterprise-related charges.

　　Second, reduce costs of financing, labor, energy, land, and other factors. Deepen financial benefits to effectively support the real economy, create a suitable monetary and financial environment, maintain reasonable liquidity, guide financial resources to be accurately allocated, and optimize financial services for enterprises. Reasonably reduce enterprise labor costs, continue some phased policies to lower enterprise employment costs, and strengthen vocational skills training to improve labor quality. Reduce costs for enterprises in energy use, land, and housing rent, promote logistics cost reduction and efficiency increase, and improve the efficiency of enterprise capital turnover.

　　Third, focus on reducing institutional transaction costs. Deepen the "streamline administration and delegate power" reform. Improve the exit mechanism for market entities, implement reforms of the industrial product access system, and promote the expanded application and nationwide mutual recognition of electronic certificates. Maintain a fair competitive market environment. Legally protect the property rights of various market entities equally and strengthen intellectual property protection. Strengthen effective supervision to promote survival of the fittest through fair regulation. Establish and improve a long-term mechanism for optimizing the business environment in the bidding and tendering field.

　　(The author is the Deputy Director and Researcher of the Macroeconomic Research Institute of the National Development and Reform Commission)