Shanghai has issued An Action Plan for Accelerating Economic Recovery and Revitalization (“The Action Plan”) in a bid to effectively coordinate efforts between anti-epidemic work and economic and social development. This plan will play a tremendous role in promoting the resumption of production and the re-opening of business across the city in the post-pandemic period. It also holds special significance for stabilizing the expectations and confidence of market entities.

1. Introducing direct support measures to help enterprises to overcome difficulties and achieve better medium- and long-term development

The whole Action Plan covers a wide range of market entities, including medium-sized and large enterprises, upstream, midstream and downstream enterprises, private enterprises, state-owned enterprises and foreign-funded enterprises. Altogether, these policies will produce a synergetic effect and directly help various enterprises to tide over their current difficulties. In Shanghai, a large number of micro, small and medium-sized enterprises operate in service-related sectors. Enterprises play a very important role in providing jobs and safeguarding livelihood services for the people.

The current round of COVID resurgence in Shanghai is unprecedented for market entities. Targeting the actual difficulties of enterprises, the Action Plan offers a policy package to comprehensively implement “tax payment deferment, rent reduction, tax rebate, as well as job stabilization subsidies” to reduce corporate burdens from multiple directions. Specifically, it allows enterprises to defer payment of “Five Insurances and Housing Fund” and taxes, while expanding the scope of housing rent reduction and exemption, reducing various fees for enterprises, increasing tax reduction and rebate and providing job stabilization subsidies. In particular, financing relief, deferred insurance payment, rent reduction and exemption are timely measures and can solve the practical difficulties facing vulnerable micro, small and medium-sized enterprises. 

As for stabilizing foreign investment, Shanghai has brought forward applications for special funds of the year 2022 to encourage multinational corporations to develop their regional headquarters, further support them to set up regional headquarters and R&D centers in Shanghai, increase support in respect of export tax rebates and export credit insurance, and encourage port and shipping companies to reduce cargo storage charges and container detention fees. All these will play an important role in boosting investment confidence and stabilizing investment expectations.

In terms of stabilizing foreign trade, the new policy measures of increasing export tax rebates, encouraging shipping companies to reduce or exempt container detention charges for specific periods of time, and helping foreign trade enterprises fulfill orders are of great positive significance.

As for resuming production, market and business, the policy measures of lowering or exempting housing rents and loan interest guarantee fees for enterprises, as well as subsidies for job stabilization are highly targeted measures. At the next step, Shanghai will carry out large-scale visits and screening, continue to focus on the optimization of the business environment through the existing measures of “delegating power, streamlining administration and optimizing government services”, and help enterprises to truly move towards stable development through solving their practical difficulties.

In the long run, by focusing on stabilizing supply chains, the "50 policy measures" will be conducive to the medium- and long-term development of various market entities.

2. Stimulating consumption and expanding investment to achieve higher-quality development in Shanghai

Consumption, investment, and exports are the "troika" drivers of China’s economic growth. As for the consumer sector which has been hard hit by the pandemic, the Action Plan specifically calls for vigorously stimulating consumption and speeding up recovery from four aspects: stimulating consumption with bulk commodities as the starting point, improving the consumer goods supply safeguard system, taking festivals as an opportunity to boost consumption, and supporting the development of cultural, creative, tourism and sports industries.

Automobiles are the pillar of the consumer market. The Action Plan proposes to increase the non-commercial passenger vehicle license quota by 40,000 during the year, and give a lump-sum subsidy of RMB10,000 to individual consumers who purchase electric vehicles to replace their fuel cars. These measures will have a clear stimulating effect on automobile consumption and play a great role in stimulating commodity consumption.

The Action Plan also includes measures to support large commercial enterprises and e-commerce platforms to issue consumption coupons. Such coupons can leverage the price effects of consumption, especially the price elasticity effect, and boost substantial increases in consumption through price changes. In fact, a series of consumption boosting policies introduced in April and May 2020 already produced a significant effect of stimulating price elasticity in the consumer sector. The new measures to simulate consumption will play a very important role in supporting and reviving Shanghai's service consumption industry, boosting jobs in small and medium-sized enterprises in the services industry, safeguarding the survival of market entities and maintaining the sound fundamentals of Shanghai's services economy. After merchants and platforms offer coupons, the government may offer further support to enterprises based on the discounted amounts. All these are good measures to quickly start consumption and stimulate market vitality. In a short period of time, it can fast regain market dynamism and build up market confidence, including confidence in attracting investments and talented minds.

As far as investment expansion is concerned, the Action Plan pays particular attention to the key role of effective investment. Specific measures include: strengthening urban renewal planning, policy support and factor safeguards, completing the transformation of old urban areas in the downtown districts within the year, launching more than 8 urban village transformation projects in the rest of the year, and bringing new infrastructure construction into the scope of special local government bond support, which will fully guide and stimulate social investment. On the one hand, these measures are conducive to the resumption of work and production in the near term and will help enterprises to come out of their difficulties. On the other hand, the measures will, in synergy with the requirements for efficient coordination, drive effective investment and achieve higher-quality development in Shanghai in the medium- and long-term.

3. Job stabilization subsidies reflect the government's confidence in achieving stable employment 

Protecting market entities is essentially about safeguarding employment and stabilizing Shanghai's economic fundamentals. The job stabilization policy showcases the government's confidence in ensuring stable employment, while employment stabilization is an important goal of the government this year, as well as one of the objectives of macroeconomic regulation and control. Because of the pandemic, many recruitment fairs in the job market have not been held so far this year, while the employment contract signing rate remains low. In 2022, 10.76 million college students will enter the job market nationwide. The coincidence of the COVID-19 resurgence and the job hunt season has produced a negative impact on the job market. 

If enterprises have not resumed production or have no revenue, they are likely to lay off their staff. By providing certain subsidies at this time, the government helps enterprises to keep their jobs, or their “business hopes”. When market entities keep their jobs, it solves both economic and social problems at the same time.



Source: Quan Heng, Party Secretary and Research Professor, Shanghai Academy of Social Sciences