China’s Ministry of Finance and State Administration of Taxation have announced new tax policies designed to support enterprises in deleveraging. The policies also incentivise investment and consolidation however, Kallanish notes.

The policy will encourage industry consolidation by offering preferential tax policies. Companies acquiring assets, undergoing mergers and restructuring debts will have opportunities to defer tax payments. Enterprises undergoing restructuring can also enjoy discounts on value appreciation tax, deed tax and stamp duties. They can also be exempted from VAT on transfers of immovable property, goods and land-use rights.

Companies carrying out investment in non-financial assets will also be able to stagger their tax payments over five years. This is seen as a measure to help support China's flagging private fixed asset investment figures.

Central governments are urging local financial administrators to put these new guidelines into practice, strengthen the training of local companies and share feedback on implementation. Implementation is likely to progress slowly and unevenly however. Vested interests at the local level are likely to see revenues impacted by the tax breaks.