On May 29, 2022, Shanghai released An Action Plan for Accelerating Economic Recovery and Revitalization (“The Action Plan”), unveiling 50 specific measures from eight aspects, including helping various market entities to overcome their difficulties, promoting the resumption of work and production and the opening of market and business in a comprehensive and orderly way, vigorously promoting the recovery of consumption, stabilizing employment, and ensuring the basic livelihood of the people.

The newly released Action Plan has at least four major features. The first major feature is its wide coverage. From the production end to the demand end, the Action Plan actually covers all aspects of Shanghai's economic and social operations. 

As far as the production side is concerned, the Action Plan focuses on helping various market entities to overcome their difficulties, promoting the resumption of work and production and the opening of market and business in a comprehensive and orderly way, vigorously promoting the recovery of consumption, and stabilizing foreign investment and foreign trade through multiple measures. From the demand side, the main focus of the Action Plan is on accelerating the recovery of consumption and giving full play to the key role of investment. 

For example, to help market entities in difficulty, the Action Plan proposes 5 major measures, including deferring payment of "Five Insurances and Housing Provident Fund" and taxes, expanding the scope of housing rent reduction and exemption, reducing fees for enterprises from multiple channels, increasing tax rebate and reduction, and offering job stabilization subsidies to enterprises.

As for stabilizing foreign investment and foreign trade, the Action Plan provides 4 major measures: supporting foreign-funded enterprises to resume production and operation, effectively helping foreign trade enterprises to overcome difficulties, focusing on stabilizing the expectations and confidence of foreign-funded and foreign trade enterprises, and better leveraging the role of special funds in guiding foreign trade and foreign investment. 

As for promoting the recovery of consumption, the Action Plan calls for taking commodities as the starting point to stimulate consumption. Specific measures include: promoting automobile consumption by increasing the non-commercial passenger vehicle license plate quota by 40,000 within the year, and reducing the purchase tax of some passenger vehicles stage by stage in accordance with national policies; offering a fiscal subsidy of RMB10,000 per vehicle for individual consumers who scrap or transfer out their small passenger vehicles that are registered under their own names in Shanghai and meet the relevant criteria and then buy electric vehicles; and providing appropriate subsidies in accordance with provisions on the consumption of green intelligent household appliances, green building materials, energy-saving products, etc. 

The Action Plan involves almost all government departments, which is unprecedented. According to the released document, the departments involved include but are not limited to all district governments, the Shanghai Municipal Commission of Commerce, Shanghai Head Office of the People's Bank of China, Shanghai Municipal Human Resources and Social Security Bureau, Shanghai Municipal Medical Insurance Bureau, Shanghai Municipal Finance Bureau, and Shanghai Municipal Commission of Housing and Urban-Rural Development.

The second major feature of the Action Plan is its “highly practical” measures. On the one hand, many of the policy measures provide "concrete financial incentives", including a lump-sum job stabilization subsidy of RMB600 per employee for industries in difficulty, and exemption of 6-month housing rent for individual tenants, and so on. On the other hand, many support metrics are quantitative, such as providing 10% financial subsidy for electricity charges, and increasing the non-commercial passenger vehicle license plate quota by 40,000. 

As for housing rent reduction and exemption, the Action Plan provides specific and detailed measures. Among them, micro and small enterprises and individual businesses that rent state-owned premises to engage in production and business activities are exempted from submitting proof of the impact of the pandemic, and will be offered with an exemption of six months of rents in 2022. For private non-enterprise organizations that rent state-owned premises and have operational difficulties, an exemption of six months of rent will be provided in 2022 by analogy to the policy for micro and small enterprises and individual businesses.

In addition, the Action Plan also proposes to encourage and guide commercial complexes, commercial buildings, professional markets, industrial parks, innovation bases and non-state-owned premises owners or management entities to grant 6-month rent relief to micro and small enterprises and individual businesses that ultimately rent their business premises. For qualified non-state-owned premises owners or management entities, subsidies of up to RMB3 million at 30% of their total rent reduction and exemption amounts will be provided by the district governments. Subject to total fiscal budget control, the subsidy funds are to be jointly borne by the municipal and district finances. If they meet the criteria as micro and small enterprises and pay housing rents, those chain catering enterprises and their branches or stores that are registered in Shanghai and seriously affected by the pandemic and pay rents will be entitled to housing rent reduction or exemption as micro and small enterprises.

The third major feature of the Action Plan is the "accuracy" of its policy measures. The relevant policy measures of the Action Plan will be implemented from June 1 to December 31, 2022, effective only for 7 months. Unlike previous action plans which were usually implemented for two, three, or even five years, the new policy measures are only valid for 7 months, why? This is because the measures are entirely aimed at the current pandemic, rather than Shanghai's long-term development strategy. This shows the accuracy of the measures. At the launch conference, the Shanghai Municipal Government also stressed that although the pandemic has had a huge impact on Shanghai's economy and society, the city’s economic fundamentals have not changed, and the long-term booming trend of Shanghai's economy remains the same. 

Secondly, the target of policy implementation is precise, including micro, small and medium-sized enterprises, individual businesses, foreign-funded enterprises, as well as workers and consumers. For example, for key foreign-funded enterprises, the Action Plan calls for the establishment of a service officer mechanism for the resumption of work and production to provide special tracking services and help them to solve outstanding problems such as work and production resumption, logistics and transportation, anti-epidemic materials, and effectively stabilizing their development expectations. For citizens in need, the Action Plan calling for continuing to implement the linkage mechanism between social assistance and security standards and rising prices and safeguard livelihood for the people in difficulty through the issuance of lump-sum subsidies, care packages and other forms.

The fourth major feature of the Action Plan is that its policy measures are "synergic". As Wu Qing, a standing member of the CPC Shanghai Municipal Committee and Executive Vice Mayor of Shanghai, pointed out at the press conference on COVID-19 prevention and control on May 29, 2022, the new measures taken by Shanghai are comprehensive, involving “deferment, exemption, reduction, rebate and subsidy” to reduce corporate burdens from multiple directions. Here, “deferment, exemption, reduction, rebate and subsidy” respectively refer to deferred payment of “Five Insurances and Housing Provident Fund” and taxes, housing rent reduction and exemption, fee reduction, tax rebates, and job stabilization subsidies. 

Taking deferred payment as an example: According to the Action Plan, payment of organizations’ share of social insurance premiums will be deferred starting from April for the 5 industries of catering, retail, tourism, civil aviation, highway, waterway and railway transportation that are in special difficulties. At the same time, enterprises and other employers affected by the pandemic may apply for deferred payment of their housing provident funds in accordance with provisions. The period of deferred payment is from April to December 2022, after which supplementary payment should be made. 

As for tax rebates, the Action Plan calls for further intensifying VAT rebate policy support. In addition to the implementation of full refund of retained stock VAX and monthly full refund of incremental VAT for enterprises in the 6 industries of manufacturing, scientific research and technical services, power, heat, gas and water production and supply, software and IT services, ecological protection and environmental governance, transportation, warehousing and postal services, the policy will be extended to more industries in accordance with the national policy requirements.



Source: Shen Kaiyan, Director and Research Professor, Institute of Economics, Shanghai Academy of Social Sciences