FOCUS OF 2022 TWO SESSIONS:SEEK PROGRESS IN STABILITY AND FURTHER UNLEASH CORPORATE VITALITY

By Zhao Ailing

On March 11， the closing meeting of the fifth session of the 13th National Peoples Congress （NPC） was held， marking the end of the two sessions of 2022. As a key word， “stability” appeared 76 times in this years Government Work Report. The report emphasized “prioritizing stability while pursuing progress”， and forcefully implementing macro policies to stabilize the economy.

This year will be very important because the 20th National Congress of the CPC will be held. Under this background， steady growth will have a special significance. Facing the triple pressure of “demand contraction supply shocks and weakening expectation”， on which part shall macro policies focus？ How should companies seize opportunities？

Keep economic growth rate within an appropriate range

In this years Government Work Report， the economic growth target for 2022 is set at about 5.5%， placing steady growth in a more prominent position. Also， the Report requires the continuation of the implementation of the “six stabilities” and“six guarantees”， improving peoples livelihood， striving to stabilize the macro-economy， keeping the economic operation within an appropriate range， maintaining overall social stability， and embracing the 20th CPC National Congress being held successfully.

Looking back on 2021， Chinas economy ran smoothly and continued to recover. In 2021， Chinas GDP reached RMB 114 trillion， equivalent to about USD 17.7 trillion. The GDP grew by more than USD 3 trillion compared with 2020 if calculated in US dollars. At the same time， Chinas GDP grew by 8.1% year-on-year in 2021， significantly higher than the expected 6% growth target put forward in last years Government Work Report. Generally speaking， Chinas economy kept recovering in 2021， but the growth rate slowed down in the second half of the year. Facing the challenges of rising global economic uncertainty， increasing inflation pressure in developed countries and continuous tension in supply chains， this years growth target is still higher than the average growth rate of 2020-2021 （5.1%）， although it is lower than the real growth rate of 2021.

Some experts said that the target growth rate of 5.5% this year was not low. The International Monetary Fund （IMF） predicts that the global economy will grow by 4.4% this year， and the growth rate of developed economies is only 3.9%. Comparatively， it was not easy for China to achieve a growth rate of 5.5% on a high base. In the long-range goals of the 14th Five-Year Plan， it is proposed that Chinas per capita GDP will reach the level of moderately developed countries in 2035. In order to achieve this goal， it is estimated that China still needs to maintain an average growth rate of about 4.0% in the next decade or longer. It is imper- ative for Chinas economy to maintain stable growth for a certain period of time in the future， to effectively guide and stabilize market expectations.

Wang Jun， chief economist of Zhongyuan Bank， said that 5% is the bottom line of the economic growth target in 2021 and shall be guaranteed， while 5.5% is a goal that requires a tremendous endeavor. Such growth targets will help complete the economic development goals set by the 14th Five-Year Plan and the goals for 2035. According to the 2022 Survey on Chinas Economic Outlook and Business Confidence released by CPA Australia， 69% of people believed Chinese GDP would grow by 5% or higher in 2022. Most people are optimistic about the economic growth potential. This business confidence derives from Chinas effective control of the pandemic and the policy measures to boost economic growth.

“Dual Carbon Goals”assessment more flexible

During the Two Sessions of 2021， carbon peak and carbon neu-tralization were first written into the Government Work Report. In the past 5 years， the number of proposals treated by the Ministry of Ecology and Environment that are related to dual carbon has kept rising. It is said that in 2021， the Ministry of Ecology and Environment undertook 1，024 proposals during the two sessions， and that the number of proposals undertaken and treated has increased by more than 20%.

During the Two Sessions this year， delegates continued to pay attention to the issues in the field of carbon peak and carbon neutralization. Zheng Yueming， Chairman of Levima Advanced Materials and delegate of the National Peoples Congress， said that under the Dual Carbon Goals， developing renewable energy has become an inevitable choice for constructing a clean， low-carbon， safe and efficient energy system. He proposed to formulate plans of developing wind power， solar power and biomass energy， and clarify the goals of installed capacity； it is imperative to give further play to the backbone role of state-owned energy and power companies in the development of renewable energy and to let the industry association play its role to guide healthy development of the industry.

Nan Cunhui， member of the Standing Committee of the CPPCC National Committee， Vice Chairman of the All-China Federation of Industry and Commerce and chairman of the Chint Group， based on the research results and the industrial development trends and focusing on how to promote green and low-carbon transformation of the social economy under the dual carbon goal， brought more than 10 proposals involving holistic intelligent charging network， clean energy， carbon emission trading market， household photovoltaic and intellectual property rights.

At the second general meeting of the fifth session of the 13th CPPCC held on March 7， Shen Nanpeng， member of the CPPCC National Committee， Chairman of the Hong Kong？X？Foundation and Founder and executive partner of Sequoia China， said in his speech that the dual carbon goal can release huge low-carbon development potential and provide a new driving engine for the complementary and integrated development between Chinas east and west. Shen Nanpeng stressed that carbon neutralization shall follow the concept of holism and calculate three accounts. The first is the economic account of “energy transmission from the west to the east”， to transform the clean energy advantage of the western region into an economic advantage； the second is the benefit account of industrial transfer and prevent the west falling behind in the industry development of carbon reduction and avoidance； the third is the ecological account of fixing carbon and increasing revenue and to turn green resources to economic benefits in the west.

He Lifeng， Director of the National Development and Reform Commission， said at the “ministerspassage” that promoting dual carbon work will create a lot of business development opportunities， such as forcefully advancing the growth of emerging industries， promoting the renewal and reconstruction of old residential communities and improving the living environment of urban and rural regions.

It is said that Chinas major power companies are using an increasingly larger proportion of renewable energy for power generation including hydropower， nuclear power， wind power and solar energy. The investment in wind power generation has accounted for about 50%. In the past decade，Chinas installed capacity of wind power generation has also increased from 60 million kW in 2012 to 330 million kW in 2021， making Chinas wind power its third-largest power source after thermal power and hydropower.

It is worth noting that the expression of ecological environment objectives in this years Government Work Report have changed. In addition to reemphasizing the continuous decline in the emission of major pollutants， this year report mentions the overall assessment of the objectives during the 14th Five-Year Plan period with appropriate flexibility. Newly-added renewable energy and raw material energy consumption will not be included in the total energy consumption control. Such change will further accelerate Chinas investment in renewable energy. Also， by increasing the R&D and application of green and low-carbon technologies， it will promote the green transformation of high energy-consuming manufacturing enterprises in the steel， nonferrous metals and chemical industries. For example， there will be more investment in new power， new energy equipment and emission treatment equipment.

Tax reduction to become the focus of positive financial policy of 2022

At the press conference of the fifth session of the 13th National Peoples Congress held on March 11， when answering a reporters question， Premier Li Keqiang said， “According to the reports I received this year， tax and fee reduction has been generally regarded as the first expectation of the governments macro policies. Here we have adjusted the structure and put the tax rebate in the front. The tax rebate is to adopt the VAT system to offer ‘pay-first-refund-later services for market entities. We make early tax rebates to return the tax to companies in a lump-sum way. This total tax amount is more than RMB 1.5 trillion. We will further promote the policy if the effect is satisfying.”

According to the Government Work Report， the annual tax rebate and reduction is expected to amount to about RMB 2.5 trillion. Through this tax reduction， China will combine the phased measures with institutional arrangements， and carry out tax reduction and tax rebates at the same time.

On the one hand， China will continue to implement the policy of tax and fee reduction to support the manufacturing industry， small and micro enterprises and individually-owned business households. China will also increase the degree of tax reduction and exemption， and enlarge the scope of application. Also， small taxpayers will be exempted from value-added tax in stages. The annual taxable income of small and micro enterprises ranging from RMB 1 million to RMB 3 million will be subject to corporate income tax reductions by half.

On the other hand， China plans to provide cash flow support for enterprises， promote consumption and investment， and vigorously improve the value-added tax rebate system. This year， China will implement a large-scale tax rebate for excess tax paid. China will give priority to small and micro enterprises by returning all the stock tax credits at one time before the end of June and fully return- ing the incremental tax credits. China will focus on solving the tax rebate issues for the manufacturing industry， scientific research and technical services， ecological and environmental protection， electric power and gas， transportation and other industries.

Wu Jiayuan， member of the North China Committee of CPA Australia， said in an interview that the tax and fee reduction policy meets the needs of enterprises and taxpayers. The total tax cuts of RMB 2.5 trillion have increased a lot from RMB 1.1 trillion last year. Tax reduction focuses on small， medium-sized and micro enterprises and some key industries， reflecting policy accuracy.

The diversification means the combination of tax rebate and tax exemption， weighted deduction and retention tax rebate.

When talking about the characteristics of the package of tax and fee reduction policies proposed in this years Government Work Report， Thomas Leung， managing partner of PWC China， said that first， it is clearly mentioned that the tax rebate and tax reduction policy shall be implemented to help businesses grow. Second， the tax measures are used to further optimize the industry and corporate structure. The tax rebate and reduction amount for six industries reached about RMB 1 trillion， benefiting small and micro enterprises and individually-owned business households. Third， various combinations of tax support will be provided to comprehensively solve the problems of retention tax rebates in manufacturing， scientific research and technical services， ecological environmental protection， electric power and gas， transportation and other industries， so as to further release the cash flow pressure of enterprises.

“Stability” comes first for foreign trade development

Faced with the current international situation and domestic economic environment， “stability”shall come first in the field of foreign trade this year. In 2021， Chinas total foreign trade of goods increased by 21.4% to RMB 39.1 trillion. At the same time， the annual absorption of foreign capital reached a record high， surpassing RMB 1 trillion for the first time. With such a high base of last year， there will be great pressure on the growth of foreign trade this year.

The Government Work Report proposes to expand high-level opening-up and promote the steady development of foreign trade and investment. In recent years， China has continuously strengthened institutional opening-up and relaxed market access. It has been reducing the negative list of foreign investment access in the country and pilot free trade zones for five consecutive years. On top of that， China has continuously expanded the scope of the free trade zone and expanded the opening-up of service industry. It is expected that more institutional opening-up measures will be launched this year to achieve the important goal of stabilizing foreign trade and investment. The Government Work Report emphasizes accelerating the development of new forms and models of foreign trade. Cross border e-commerce， overseas warehouses， innovative trade in services and digital trade will become key areas to optimize foreign trade in the next phase， and also the driving forces to promote trade growth.

Yang Weigang， member of the National Committee of the CPPCC， proposed to accelerate the digital transformation and upgrading of traditional industries， and encourage enterprises to explore more overseas markets through cross-border e-commerce platforms and other means. He also suggested increasing new modes and formats of digital trade， accelerating the construction of digital trade ports， building a demonstration base for the development of the digital trade industry， and advancing transformation and upgrading of relevant industries through digital trade. It is also necessary to build a digital trade talent cultivation and cooperation mechanism of “government leading， main responsibility for colleges and participation by business enterprise”， strive to attract more high-end talents in the field of digital trade.

The Regional Comprehensive Economic Partnership （RCEP）， which came into force on January 1 this year， is expected to bring huge trade and investment opportunities， and will play an important role in stabilizing foreign trade. Regarding this worlds largest free trade area， the Government Work Report proposes to support enterprises to make good use of preferential tariffs， accumulation of origin and other rules to expand trade and investment cooperation.

In view of deepening the cooperation of industrial chain and supply chain within the RCEP region， Wang Wei， delegate of the National Peoples Congress and Deputy General Manager of Dongfang International Enterprise Co.， Ltd. of Dongfang International Group， suggested to encourage and guide enterprises to actively integrate high-quality resources of the RCEP region. The government shall make policies to encourage enterprises to actively utilize raw materials， technology R&D and marketing channels in the region， and build global R&D centers， design centers and innovation centers， to extend their business towards R&D cooperation， joint design， marketing and brand cultivation. It is also important to coordinate with the domestic industry chain， form an independent global production system， and grab new opportunities in the consumption market expansion and upgrading， to improve the status in the global industrial， supply and value chain. The growth potential of consumer market of the RCEP region is huge， which will bring historic opportunities for the development of cross-border e-commerce in China.