Market News International:

The profits of industrial companies rose 31.5% in the first two months from a year earlier. In fact, we heard that some companies' cost of capital is increasing, including staff salaries and taxes. Since there is not much money left for companies after paying the tax. I believe the number just mentioned is gross profit, not net profit. If this is true, the next step in regard to a company's investment may be unknown. What are your views on this issue?

Mao Shengyong:

Firstly, it is true that the profits of industrial enterprises above the designated size basically increased 31.5% year-on-year. There are three main reasons for the growth: first, the price of major industrial products has been growing at a fast pace, with a PPI increase of 7.8% in February; second, industrial production has been expanding; third, the profit margins of companies are also growing. To be fair, the reason why we could reach the number of 31.5% is also because of the low base registered in the same period of last year. As regards the next step, the growth rate of enterprise profits may gradually return to a normal and reasonable level, but the enterprise profits could still maintain a relatively high growth.

Secondly, I'll answer the question about enterprise costs. We also received some feedback from enterprises through a variety of channels. In general, the State implemented a series of tax reductions to reduce enterprise costs. Last year, we reduced the overall tax burden by nearly 1 trillion yuan, particularly by replacing the business tax with a value-added tax that produced a reduction of 500 billion yuan. So, in this period, we have achieved great success in reducing costs. However, we still need to take note that enterprise costs are still relatively high, creating much pressure on their operations. The enterprises still carry a heavy burden, especially when overall domestic demand is not quite so strong. Hence, we need to push ahead with tax reduction and cutting systemic transaction costs, reducing the enterprise burden and creating a better market environment for their future development. Thanks.

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