Archives January 2018

China to optimize business environment

The State Council made arrangements to optimize the business environment to stimulate market vitality and social creativity, at an executive meeting Wednesday.

Premier Li Keqiang, who chaired the meeting, called for universal use of a negative list of sectors and businesses off limits to foreign investment to control market entry.

Optimizing business environment would help productivity and competitiveness, he said.

The business environment is the foundation for developing a modern economy and ensuring high-quality development, the premier said.

Greater efforts should be made in streamlining administration, compliance oversight and offering better services. An internationally competitive business environment would have equal treatment for domestic and foreign enterprises and stimulate market entities and social creativity,” he said.

China was ranked the 78th in ease of doing business, according to a 2017 report by the World Bank, up from the 96th place in 2013.

The government will cut red tapes, reduce taxes and slash fees for enterprises.

It was decided at the meeting that more efforts will be made to slash or cancel fees paid by enterprises, including operational and service fees and fees charged by sectoral associations and chambers of commerce. Costs for customs clearance will be lowered.

The government will further simply the procedures of administrative review and speed up approval procedures for business start-up, tax payments, application for construction permit and water, electricity and gas services, and real estate registration. The slashing of electricity price will also be a priority.

A new oversight mechanism characterized by integrity and information disclosure will be established at a faster pace. A unified punishment mechanism for breaches will be improved. An evaluation mechanism for business environment will be established, and rolled out nationwide over time. Special sectoral measures will be unveiled to facilitate the application for construction permits and cross-border trade.

“There is still much more that we can do to streamline administration, enhance compliance oversight and improve services. We should foster a more enabling business environment to incentivize a visible improvement in the ease of doing business for entrepreneurs, market entities and the general public,” Li said.

A series of measures have been taken by the current government to cut red tape, reduce corporate burdens and improve the business environment. It has canceled or delegated administrative approval by the State Council bodies on 697 items, which account for 45 percent of the total.

The government also shortened the list of intermediary services for administrative approval by 323 items, or 74 percent of the total, and canceled professional qualification and certification requirements for 434 items, more than 70 percent of the total.

China speeds up introduction of property tax

As part of the plan to contain housing price, China vows to step up housing system reform and create a long-term market mechanism.

When and how a property tax will be levied has long been a public concern.

China’s finance minister Xiao Jie has published his policy statement on People’s Daily, the Communist Party of China (CPC)’s flagship newspaper.

What have been specified?

Xiao outlined that property tax will be levied on industrial and commercial properties, as well as personal residential houses, based on their “appraised value”. He also suggested the legislation work would be completed by 2019, which would lay the foundation for its enforcement in as early as 2020.

Experts believe it has sent out signals for the speeding up of China’s introduction of property tax.

“The article shows that the authorities now have clearer thinking on the levy of property tax, as substantial questions have been specified, especially how the taxes will be collected,” said Yan Yuejin, senior researcher of the Shanghai-based E-house China R&D Institute.

Yan noted that “appraised value” means a comprehensive assessment of the original and current value of the property, while also taking into account affecting factors such as the real estate market situations and the price of similar property in surrounding areas. “It’s a rather fair and reasonable way to do it,” Yan added.

It would require the establishment of an appraising system by each city, according to Zhang Dawei, chief analyst of Beijing-based Centaline Property, a leading property agent company. In Xiao’s article, he also confirmed that local governments would obtain enough authorization in the process.

“That means local governments are allowed to run pilot policies based on their specific circumstances, so as to map out practical schemes that suit local development,” said Jiang Zhen, research fellow with Chinese Academy of Social Science, “and their experiences drawn from the pilot programs will become important reference for property tax legislation, which will be pressed ahead steadily.”

Why is property tax put on China’s legislation agenda?

“Housing is for people to live in, not for speculation,” this has been the tone-setting slogan for China’s real estate market since it was first brought up by Chinese president Xi Jinping on the Central Economic Work Conference in December 2016. The long-awaited property tax is a key measure to reduce the appeal of houses as speculative investment, and bring the development of China’s housing market to the right direction.

China’s property price has been rocketing for over a decade, partly due to Chinese investors’ preference for houses as investment and the resulting speculations. Bloomberg estimated that 25 percent of China’s housing demand is out of speculations.

At present, taxes are only levied when houses are bought or sold, which leaves multi home owners with no extra financial burdens. The planned introduction of property tax may not only deter future speculators, but also drive existing multi home owners to sell extra ones before the enforcement of the new tax, thus increasing housing supply in the market.

But it’s all up to the release of further details on how the property tax will be rolled out step by step.