Aid with a heart lifts industry's soul
Eternal Asia Supply Chain Management Ltd, a Chinese logistics company that was the first to list from the sector, received 7.5 trillion yuan in special loans from six banks to contain the COVID-19 impact. It is also a beneficiary of other fiscal subsidies.
"The local government has exempted property tax and tax on using urban land during the pandemic, saving 1.56 million yuan in total for us," said Chen Zhengui, chief accountant of the company.
Eternal Asia specializes in offline-to-online supply chain solutions like supply chain financing, artificial intelligence platforms, data analytics and logistics information. It signed agreements with medical supplies and equipment companies from the US, Australia and Southeast Asia to ensure sufficient imports for saving lives during the pandemic. Its imports of medical supplies were exempt from Customs fees, according to Chen.
Rescue of thousands of businesses such as Eternal Asia, which were crucial to society's smooth functioning, became one of the priorities of the Chinese government after the COVID-19 outbreak.
According to data from the Ministry of Finance, reduction of taxes and fees nationwide exceeded 1.5 trillion yuan in the first half of this year. By the end of June, the central government allocated 2.937 billion yuan in subsidies and 239.6 billion yuan in concessional loans for more than 6,600 companies.
"The worse the situation, the more were the funds spent by the government," said Tang.
In Shenzhen, government bonds doubled this year already from the level of 2019 to fill the fiscal gap, Tang said.
In May, Chinese authorities announced 1 trillion yuan in COVID-19 special treasuries. These funds will be raised by the central government, but the proceeds will be passed on to local governments, to be spent on local public health, infrastructure construction, and epidemic response.
The government has specified that funds raised from the special bonds should be used by local governments to safeguard employment and livelihood needs, which might also include further cuts to taxes, fees, rentals, and interest payments where needed, said Andrew Fennell, an analyst with Fitch Ratings, one of the Big Three global rating agencies (the other two being Moody's and S&P).
"There has been a clear change in policy preferences in recent years toward on-balance sheet fiscal easing, and away from credit stimulus. This has been facilitated by the deployment of a broader array of fiscal tools, such as local government special bond financing," said Fennell.
Earlier, Finance Minister Liu Kun said in an interview with Chinese media that the government will be able to achieve its annual fiscal targets, according to the projection of steady economic recovery, cutting more than 2.5 trillion yuan in taxes and fees to support business and mitigate the impact of COVID-19.
Liu stressed strict supervision of the funds raised from the government bonds and special treasuries to ensure they will not be withheld or diverted for unauthorized uses.