Core view
Manufacturing investment is the strongest variable for steady growth in 2022, and the annual growth rate is expected to reach 11.1%. What support does fiscal and tax policies have for manufacturing investment? Focus on two aspects: 1) financial funds support major projects to stimulate or pry manufacturing investment, and local governments use land, tax, credit and other preferential policies to pry manufacturing investment in the process of attracting investment.
2) make use of quasi financial means such as government owned companies, government guidance funds and capital injection master funds to give full play to the leverage of financial funds to help manufacturing investment.
Manufacturing investment is the largest expected difference in 2022
The biggest expectation difference of the current market is that it underestimates the contribution of manufacturing investment to steady growth. After the central economic work conference has set the tone for steady growth, the market is still looking for traditional infrastructure and real estate signals according to the picture. In our annual strategy report "breaking through the industrial siege first" released in November 2021, we prospectively put forward that the manufacturing industry will be the core support for steady growth in 2022. The year-on-year growth of 20.9% in manufacturing investment from January to February has been realized. We continue to suggest that manufacturing investment in 2022 is the main contributor to economic growth, The annual growth rate is expected to reach 11.1%.
We mainly suggest that under the pattern of "stable growth of new manufacturing" in the future, manufacturing investment will replace the traditional infrastructure and real estate investment and become the core driving force of the economy. There are two main logics: one is to make up for the weakness at the supply end of the manufacturing industry, which is mainly manifested in strengthening the chain and making up the chain. Taking the chain length system as the starting point, the government participates in the coordination and derives a large amount of manufacturing investment. The second is the industrial base reconstruction in the process of economic structure transformation, which is mainly reflected in the "two transformation" of the industry, namely, the new energy of the industry and the intelligence of the industry. The industrial base reconstruction will drive the profound changes in the investment behavior of enterprises, and the capital expenditure of enterprises will no longer be confined to the profits of the original industry, but will be promoted by the trend of industrial transformation to a greater extent to carry out cross industry investment.
How can fiscal and tax policies support the development of manufacturing industry?
The government helps the development of manufacturing industry through fiscal and tax policies and quasi fiscal tools. Manufacturing industry is the foundation of China's business and plays an important role in economic growth, employment, finance and taxation. As the basis and means of national governance, how can fiscal and taxation policies support the development of manufacturing industry? We believe that the essence behind fiscal and tax policies is government behavior. China is a typical large government and large financial system, and the boundary between the government and the market is more blurred. The government does not just stay on the provision of public goods, but participates in the development of manufacturing industry directly or indirectly through fiscal and tax policies and quasi fiscal means.
Specifically, firstly, the support of fiscal and tax policies can be divided into two categories: 1) financial funds are directly matched with major central or local projects, in which manufacturing and strategic emerging industries are mainly subordinate to the direction of industrial upgrading; 2) As an important means for local governments to attract investment, fiscal and tax policies encourage manufacturing enterprises to expand production and investment by giving preferential treatment in land, tax, credit and other aspects. Secondly, the quasi fiscal means focuses on giving full play to the leverage attribute of the government and financial funds, mainly in three aspects: 1) the government injects capital to establish a wholly-owned company, which is similar to the "urban investment platform", and the company participates in the development of manufacturing industry through market-oriented means; 2) It is the establishment of a mixed ownership company, such as Shenzhen Venture Capital, which is entrusted to manage the Shenzhen guidance fund. It was funded by the Shenzhen municipal government and guided by social capital in 1999; 3) Local governments entrust funds to market-oriented master fund managers, such as Shengshi investment group.
How can fiscal and tax policies support this round of new manufacturing?
Financial funds help major projects and boost manufacturing investment directly or indirectly. The government work report specifies that financial funds should ensure the capital needs of major projects. Major projects are fixed asset investment projects led by the central and local governments, with large investment scale, in line with the guidance of industrial development, and have a significant impact on and drive the economy and society. They are mainly invested in infrastructure, industrial upgrading and people's livelihood security. The typical characteristics of major project investment in 2022 are scale improvement and front-end rhythm. As of early April, according to the comparable caliber of 19 provinces in 2022, the growth rate of major project investment reached 7.8%, and the scale exceeded 10 trillion. All localities made a good start to implement steady growth. The centralized commencement time point in 2022 was significantly more than 1-2 months ahead of previous years. We believe that financial funds help major projects and play an important role in boosting manufacturing investment:
1) industrial upgrading projects are closely linked to industrial foundation reconstruction, chain strengthening and supply shortage. Government investment plays a leading role and can directly promote the investment of manufacturing industry. Industrial upgrading project is an important investment direction of major projects, mainly including manufacturing industry, strategic emerging industries and advantageous traditional industries. From the perspective of the 14th five year plan of each province, the project arrangement focuses on the reconstruction of industrial foundation, strengthening the chain to supplement the chain and supply shortage. Taking Zhejiang Province as an example, its 14th five year plan clearly states that it will invest 100 billion and 150 billion respectively to complete 70 modern industrial projects and 25 scientific and technological innovation projects, focus on promoting the reconstruction of manufacturing infrastructure and the upgrading of industrial chain, build major industrial platforms, and plan to build ten landmark industrial chains around industrial new energy and intelligence. We believe that financial funds play an important role in directly supporting the construction of major projects, helping to pry rather than squeeze out manufacturing investment. In particular, financial funds support more industrial infrastructure or build platforms, help industrial agglomeration and improve the modernization level of industrial chain, so as to drive the investment related to manufacturing infrastructure Reengineering and chain reinforcement.
2) infrastructure projects complement weaknesses and tap potential to indirectly promote manufacturing investment. Infrastructure is also an important direction of major project investment. We believe that finance helps major projects improve infrastructure, and promotes enterprises to increase capital expenditure through better infrastructure, forming an indirect pull. Specifically, traditional infrastructure is conducive to making up for weaknesses, tapping demand potential, improving the business environment and reducing operating costs; In recent years, with the promotion of industrial new energy and industrial intelligence, the related new energy infrastructure and new infrastructure have also increased significantly. For example, Zhejiang has significantly listed in the 14th five year plan, on the one hand, actively accelerate the construction of digital infrastructure, intelligent infrastructure and innovative infrastructure, on the other hand, actively promote the development of nuclear power, offshore wind power, pumped storage, clean coal and other fields, We believe that the rapid promotion of new infrastructure and new energy infrastructure will help consolidate the foundation of the industrial chain and better leverage manufacturing enterprises for investment.
As an important means of attracting investment, fiscal and tax policies help the government promote the development of manufacturing investment. China's political and economic system determines that the government's participation in economic development does not stop at providing public goods, but driving economic development or creating an environment for economic development. This is reflected in the government's deep participation in resource allocation, using land, tax, credit and other resources to attract enterprises and reduce enterprise costs in the process of attracting investment, so as to promote the capital expenditure of manufacturing industry, which is in various special economic zones, development zones, high-tech zones The free trade zone has outstanding performance. The development zone is typical. Enterprises that can enter the development zone will enjoy certain preferential policies, such as preferential provision of industrial land and tax relief. The high-tech zone is a certain resource preference and preference for specific industries that encourage development. All kinds of preferential policies related to investment promotion, such as tax, land, innovation, operating expenses and market, can be found in the investment promotion departments of relevant regions.
After the 14th five year plan established the goal of developing a modern industrial system and building a manufacturing power, the 14th five year plan of each province has more industrial layout in terms of industrial new energy, intelligence, strong chain supplement, specialization and innovation, independent control and so on, and also provided many fiscal and tax concessions in the field of investment attraction.
At the same time, some tax preferential policies implemented normally also help to encourage enterprise transformation and innovation, and then increase investment. Since 2015, China began to implement the policy of adding and deducting R & D expenses, and then increased the proportion of adding and deducting. In 2021, manufacturing enterprises are required to spend R & D expenses in R & D activities. If intangible assets are not formed, they will be added and deducted before tax according to 100%, and if intangible assets are formed, they will be amortized before tax according to 200%. Finally, through the policy of adding and deducting R & D expenses in 2021, the tax reduction and exemption enjoyed by enterprises in advance reached 333.3 billion yuan. We believe that considering the increasingly complex external environment and the strong demands of China's independent control, domestic substitution, strong chain supplement and short board, the R & D expense plus deduction policy helps to encourage enterprises to continuously innovate, transform and upgrade, and then affect the capital expenditure behavior of enterprises.
One of the ways for quasi fiscal instruments to support new manufacturing: the government guidance fund invests in the field of making up for weaknesses. The government guidance fund is a policy fund funded by the government to make up the capital gap and guided by market-oriented operation. It has both "policy orientation" and "market operation". The government guidance fund is set up by governments at all levels through budget arrangements, with separate investment or joint investment with social capital, to invest in key areas and weak links of economic and social development. The establishment of funds can overcome the failure of financial leverage and guide the manufacturing industry.
From the perspective of operation structure, the government guidance funds are mainly divided into two categories: the master fund single-layer structure and the master sub fund double-layer structure. The single-layer structure of the master fund refers to the direct investment in the target project by the master fund; In the two-tier structure of the master fund and the sub fund, the sub fund is fully or partially funded by the master fund, which fully leverages social funds. Taking Anhui Province as an example, in 2021, the "double recruitment and double introduction" of ten new emerging industries was established to guide the master fund, promote innovative financial products such as "science and innovation loan", and strengthen the assessment of government financing guarantee and re guarantee institutions. As the first pilot enterprise of state-owned capital investment and operation company in Anhui Province, the provincial finance has injected 11.3 billion yuan for the development of industrial funds for four consecutive years, driving social capital investment of 30.4 billion yuan, with a leverage ratio of 1:2.69 Through the direct investment of the "three heavy and one hit" fund, Anhui Province invested heavily in a number of large projects such as Weilai automobile and Changxin storage.
From the perspective of distribution mode, the income of government guided fund can be divided into two types: horizontal structure and multi-layer structure. Horizontal structure, that is, the income distribution order of all investors is the same; Multi tier structure means that investors at different levels enjoy different distribution orders and distribution schemes. The most common is the two-tier structure of priority and inferior. From the past practice, the priority shares of government guided funds are generally subscribed by banks and non bank financial institutions, and the inferior level is subscribed by state-owned enterprises or subjects designated by the government, which is the bottom of the priority funds.
The second path for quasi fiscal tools to support new manufacturing: large funds help realize the independent control of the industrial chain. The Ministry of industry and information technology established the national integrated circuit industry investment fund (hereinafter referred to as the "large fund") as early as September 24, 2014.
The large fund operates in the form of company system (i.e. national integrated circuit industry investment fund Co., Ltd.), and the main shareholders are the Ministry of finance, CDB finance, China tobacco, China Mobile and Ziguang communication. It is divided into five years of investment period, payback period and extension period, with a 15 year investment plan. The large fund focuses on the integrated circuit chip manufacturing industry and takes into account the fields of chip design, packaging and testing, equipment and materials. The purpose is to narrow the gap between China's integrated circuit industry and the international leading level and realize the independent control of China's industrial chain.
In terms of the proportion of subdivided investment, the first phase of the large fund focuses on covering chip design, sealing and testing, materials and other links. We expect that the second phase of the large fund will accelerate the layout of semiconductor materials and equipment, such as film equipment, test equipment, cleaning equipment, chemical mechanical grinding equipment and other domestic equipment fields, as well as photoresist, target, silicon wafer and other neck fields.
Risk tip: global inflation exceeds expectations; Global monetary policy tightened more than expected; China US strategic game exceeds expectations
