Chinese government launched 'Made in China' campaign

Seeking to retain its manufacturing prowess, Chinese government has launched a "Made in China" campaign with a host of tax concessions coinciding with Prime Minister Narendra Modi's "Make in India" pitch.

China will encourage high-tech imports, research and development (R&D) to upgrade 'Made in China', a decision by the Chinese central government said.

Under the new campaign China will use tax breaks to encourage enterprises to upgrade their equipment and increase R&D efforts to improve the manufacturing industry.

Companies that bought new R&D equipment and facilities after January 1 or possess minor fixed assets will have taxes reduced based on value, the Cabinet, presided over by Premier Li Keqiang, has decided.

Imported high-tech equipment will also enjoy tax deductions in aviation, bio-medicine production, manufacturing of railway and ships, electronics production including computer and telecommunications, instrument production and those used in making IT products and software, state-run Xinhua news agency reported today.

The new decision coincides with the global launch of Modi's 'Make in India' campaign today.

The Indian Embassy here, Consulates in Guangzhou, Shanghai and Hong Kong held special investment promotion events showcasing the 'Make in India' campaign.

China's new move aims to prompt technical improvement of companies, especially innovation of small and medium-sized enterprises, which in the last three decades propelled it to become world's second largest economy and made it a powerhouse of the manufacturing industry.

The cabinet asked government organs to implement the new measures as soon as possible to arm "Made in China" with advanced technology and equipment, encouraging more competitive products with high added value, the report said.

China's manufacturing sector, a key driver of its economic growth, is regarded highly competitive in the global market. Analysts believe the measures will not only start a new round of innovation but also spur fixed asset investment, and in the bigger picture contribute to stabilising economic growth. 

Zhu Jianfang, chief economist of CITIC Securities, said the measures will lighten burdens of enterprises in the real term and prompt the upgrade of outdated equipment. Combined tax deduction of A-share listed companies is expected to reach 233.3 billion yuan (USD 38 billion) in the first year after the policy takes effect, equal to 7.8 per cent of their total cash flow in 2013, according to the calculation of the Shanghai Stock Exchange (SSE).

Zhu said three aspects of problems will be eased, citing weak domestic demand and investment amid slowing economic growth, lagging equipment in manufacturing sector and low technical level of home grown companies.

Zeng Gang, analyst from the SSE, expects the move to help China's manufacturers greatly improve their global competitiveness and produce more self-invented merchandises. "Under the guidance of the government, the enterprises will actively invest in fixed assets, upgrade their technologies and equipment, which will be a boon to current economic growth and nurture growth potentials in the long run," Zhu said.