[Weekly Economic Observation] Continuously Promoting Cost Reduction and Efficiency Enhancement in the Real Economy Enterprises | Costs | Economy

Cost reduction is an important part of China's supply side structural reform, and it is an important decision and deployment made by the Party Central Committee and the State Council to effectively alleviate the operational difficulties of the real economy and promote the transformation and upgrading of enterprises. Recently, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Finance, and the People's Bank of China jointly issued the "Notice on Doing a Good Job in Key Cost Reduction Tasks for 2023", deploying the key cost reduction tasks for this year. This is the seventh consecutive year that the four departments have issued cost reduction notices.

The continuous deployment of cost reduction work for many years highlights the importance and urgency of this work, and also reflects the determination and efforts of the Party Central Committee and the State Council to effectively reduce enterprise costs. In recent years, a large number of valuable and targeted policy measures have been introduced, which not only effectively stimulate the vitality of business entities, but also enable real economy enterprises to take action lightly, effectively promoting the improvement of economic quality and efficiency. At the same time, there are also some different voices in the market: why have so many companies still felt heavy operating burdens and cost pressures after reducing costs for so many years? How much potential is there for the real economy to reduce costs?

Currently, China's economy is evolving towards a stage of higher form, more complex division of labor, and more rational structure. In this process, the cost of the real economy has become an important factor affecting the healthy and sustainable development of the economy. Cost reduction, as the name suggests, is the process of using a series of policy combinations to strive for a reasonable reduction in the comprehensive costs of real economy enterprises, enhance their profitability, and further enhance their industrial competitiveness. In summary, the essence of cost reduction lies in benefiting the real economy, reducing institutional transaction costs, and promoting technological progress.

In practice, the comprehensive cost of enterprises not only includes conventional tax and fee costs, but also involves financing costs, energy costs, logistics costs, and institutional transaction costs. The complexity and diversity of enterprise cost composition, as well as the systematicity and correlation of factors involved in cost reduction, determine the long-term and arduous nature of cost reduction work in real economy enterprises. This is also the reason why cost reduction work cannot be achieved overnight and won with one move. In fact, the deployment of cost reduction work has changed and adjusted every year, as can be seen in the wording of notices in recent years.

For example, in the 2019 notice, it was proposed to "continue to promote large-scale tax and fee reductions". In 2021, it was changed to "continuously and reasonably reduce the burden of taxes and fees". This year, it is changed to "enhance the precision and targeting of tax and fee preferential policies", reflecting a shift in the approach to tax and fee reduction from pursuing quantity to optimizing quality; For example, in recent years, the expression of reducing financing costs has shifted from "strengthening financial support for the real economy" to "deepening financial concessions to effectively support the real economy", and then to "improving the quality and efficiency of financial services for the real economy", reflecting the continuous increasing importance of reducing financing costs.

Since the beginning of this year, the overall growth trend of China's economy has continued to recover, and policy effects such as stabilizing growth have continued to emerge. The year-on-year growth rate of most production demand indicators has increased, the service industry and consumption have recovered rapidly, employment and consumer prices have remained generally stable, and the quality of economic development continues to improve. However, it should also be noted that the international environment remains complex and severe, with weak global economic growth and insufficient domestic market demand. Some structural problems are more prominent, and real economy enterprises still face many risks and challenges in their operation and development. Especially, some small and medium-sized enterprises, individual workers and merchants still face difficulties after enduring continuous shocks, and the confidence and expectations of business entities still need to be boosted. Further efforts are still needed to promote high-quality economic development.

In this context, continuing to deploy and promote cost reduction work to deepen and solidify is not only of practical significance in strongly supporting the relief and development of business entities and helping China's economy return to the normal growth track, but also in the long run, it will contribute to the accumulation and development of China's real economy and accelerate the construction of a more competitive modern industrial system. It should be pointed out that while solidly promoting the implementation and effectiveness of various policies, and giving enterprises a real sense of gain, it is also necessary to actively guide enterprises to strengthen cost control and refined management throughout the entire process, further incentivize enterprises to increase efficiency through internal tapping, and continuously enhance the vitality and competitiveness of the real economy enterprise.