Tax Cuts? Small And Medium Sized Shoe Companies Help Save Straw

From 11.7% to 10.6%, in July 1st, the website of the National Bureau of statistics officially announced the news that China's GDP growth slowed down 1.1 percentage points in the first quarter of this year.

For many small and medium-sized enterprises in China, who are struggling with the edge of life and death, this may be a life-saving straw.

"At present, the intensity of macroeconomic regulation has basically been put in place."

An authority close to the decision-making department recently told the investor newspaper.

In the seven or eight years of rapid economic growth in China, this is the first slowdown.

In the data released by the National Bureau of statistics, it is more noteworthy that the growth rate of steel has dropped more than 10%, and that of electrolytic aluminum and ferroalloy has dropped more than 20%. These three industries are precisely the overheated industries that should be precisely dealt with in macroeconomic regulation and control.

Such policies as strict industrial access, environmental protection and monetary tightening have not only brought about a large number of small and medium-sized enterprises on the verge of collapse, but also the large enterprises.

According to the National Bureau of statistics, in the first 5 months of 2008, the loss of Industrial Enterprises above designated size increased by 56.1% over the same period last year, of which Guangdong's deficit increased by 49.3%, and 26% of the enterprises suffered losses.

According to the recent sampling survey by relevant departments, the current macroeconomic regulation and control policies, such as exchange rate, labor costs, environmental protection and so on, have increased the total cost of enterprises by about 30%.

A policy research authority said: "this has reached a critical point for a small and medium-sized enterprise. We believe that the next step is relatively weak macroeconomic regulation and control."

Tax cuts are imperative

Faced with changing macro policies, some experts believe that enterprises and individuals should be lightened first.

But the tax cuts discussed are as far away as Ai Zhili.

As the general manager of Tangshan Baotai iron and Steel Group, when prices of raw materials such as iron ore and coke are soaring and steel mills are facing pressure of losses, Ai Zhili, like many owners of private steel mills, prefers to sell foreign businesses to foreign capital or to shut down production, and there is no hope that local governments will be able to offer tax cuts to help businesses tide over difficulties.

"The steel industry is like a rat in the street, and the state's macro control policy is very restrictive."

He told the investor newspaper reporter with a wry smile.

The previous iron and steel industry policy requires that the blast furnace of the new steel plant must be above 1000 cubic meters. For many private steel mills with a maximum of 300 cubic meters of blast furnace, such a requirement is not expected.

There are restrictions on macroeconomic regulation and control policies, and there are rising prices of raw materials. The hardships of private steel mills over the past year are the epitome of the fate of many small and medium-sized enterprises in China.

Since 2003, almost all the energy and raw materials and metal products supporting China's economic growth have been rising.

International iron ore prices have risen by 165%, while world copper prices and bauxite prices have risen nearly 4 times.

At present, many local steel billets produced in Tangshan are losing a ton to two hundred yuan per ton of billets. Some steel mills now turn off half or 1/4 of the blast furnace and do not produce enough.

Ai Zhili has not yet heard of the tax cuts. He said: "there are tax laws in the state, and there are duties under the Inland Revenue Department. The tax law stipulates how much to pay, but the task is increasing year by year and must be completed.

After the Spring Festival, we should get a good start. We will have more than half of the tasks in June. We must finish the whole year's tasks at the end of the year, and we will not succeed in finding several enterprises to talk.

However, such a situation may soon change. After the slowdown in the first quarter of GDP, the relevant government departments are studying tax and other supporting policies for the hard landing of the economy.

"The problem of tax reduction has been raised by many departments recently."

The responsible person of the central decision-making department told the investor newspaper, such as personal income tax, now the tax administration and the CPPCC are all studying the problem of reducing the threshold.

In the period of stagnation of economic growth and inflation, tax reduction is usually the most effective means of macroeconomic regulation and control by market economy countries. Tax reduction can promote economic growth, expand tax base and increase revenue, so as to achieve budget balance.

In 1970s, the US government implemented a fiscal policy at the core of tax cuts to smooth out the stagnation of the economy.

In the 4 years from 1981 to 1984, the US government lowered the marginal tax rate of personal income tax by 25% and the capital gains tax rate by 8%.

"To reduce taxes, the formulation of policies must take into account the enormous difficulties facing enterprises."

Li Zuojun, a researcher at the development research center of the State Council, told the investor newspaper, "the central working conference recently mentioned this problem and began to stress fiscal policy, because monetary policy alone can not solve all problems."

He believes that the biggest difficulty facing enterprises is that all costs are rising. In addition, it will also face the pressure of RMB appreciation and export tax rebate reduction. Therefore, "tax reduction for enterprises is a very important direction of fiscal policy".

The collapse of enterprises and the financial turn

Macroeconomic regulation and control policies will soon be bottomed out, because China's economic growth has bottomed out, and even some researchers believe that China's economy may suffer negative growth in the second half of this year, excluding inflation.

In the first big city of iron and steel production in Tangshan, quite a number of private enterprises are unable to stand up to the market and take the initiative to sell themselves to foreign enterprises. In the textile city of Xiaoshan, the collapse of enterprises began in the early days. While in the processing export base of Dongguan, enterprises encountered an unprecedented dilemma of RMB appreciation and monetary tightening.

Taking Xiaoshan, Zhejiang as an example, this year, the cost of raw materials, the export tax rebate, the RMB appreciation, the tightening of bank credit and the promulgation of the new labor law have brought a great blow to enterprises.

According to statistics, in 2007, the overall opening rate of Xiaoshan area was around 70%, while some small-scale weaving enterprises started up below 40%.

From 1 to November 2007, the total profit of cotton spinning industry dropped by 46.78% compared with the same period last year.

According to the forecast of local government departments, 5% of the textile enterprises have gone bankrupt. If this continues, 20% of the textile enterprises will stop production by the end of the year.

In Dongguan, the growth rate of export volume is decreasing.

In the first quarter of this year, Guangdong's export growth slowed down 12.2 percentage points year-on-year. Dongguan's exports of shoes and shoes were 160 million pairs in the first quarter, down 8.5% from the same period last year, of which 110 million pairs of shoes exported to the United States decreased by 13.9%.

Wang Zhiguang, vice president of Dongguan Toy Association, told investors newspaper that with the pformation and upgrading of Dongguan's industry, two more than two years later, only 2000 of the more than 3800 toy enterprises can "live", and the remaining more than 1800 toy enterprises will go bankrupt.

Data show that in 2007, 909 foreign-funded enterprises in Dongguan went bankrupt and accelerated since 2008.

According to media reports, the town of Xiangshan in Jue Xi, Ningbo, provides processing services for 30 top brands in the world, and has gathered more than 500 factories. As of the end of June, more than 100 enterprises were discontinued, and the figure is still expanding.

China's shoe capital Jinjiang and Wenzhou have recently seen the trend of small and medium-sized enterprises going bankrupt.

The appreciation of the renminbi has led to a sharp decline in the profits of export enterprises. Interest rates and loans have made it difficult for a large number of small and medium-sized enterprises to tighten their capital chains.

Earlier, people in the industry called for the fight against inflation should not rely solely on monetary policy, fiscal and taxation policies should also come forward to create a relaxed environment for enterprises.

The central bank's Financial Times recently quoted Yu Xuejun, director of the Jiangsu Regulatory Commission of the China Banking Regulatory Commission, as saying that in order to curb inflation, China should focus on fiscal policy and monetary policy as a supplement.

Yu Xuejun suggested that China should increase financial and price subsidies for workers and low-income families, while reducing business tax and personal income tax to offset the impact of rising costs, reduce direct investment in fixed assets and improve the structure of fiscal expenditure.

Since 2003, the fiscal revenue has been increasing year by year. The ratio of GDP has increased from 11% in the last century to more than 20% in the past century. The government investment is more and more popular. The key projects are in full swing, and the excess liquidity has brought huge dividends to the financial sector. "GDP"

Jia Kang, director of the Financial Science Research Institute of the Ministry of finance, told the investor newspaper that the key point of a sound fiscal policy is to "optimize the structure" and increase effective supply.

The "optimized structure" means that the fiscal expenditure has expanded part and also contracted part.

Wang Jian, Secretary General of the national development and Reform Commission of the China macroeconomics society, believes that the so-called sound fiscal policy is not expansionary. Now, the decline of GDP represents the prospect of a lack of demand, and the expansion of finance should be an inevitable trend.

The specific way is to increase financial expenditure and expand the scale of finance.