Preferential tax policies should be used to create new driving power for mass entrepreneurship and innovation, Premier Li Keqiang stressed at the State Council executive meeting on Oct 21.

It was decided at the meeting to give tax breaks to encourage enterprises’ research and development efforts. In addition, an income tax policy piloted in innovation demonstration zones will be expanded to the whole country.

As pressures increase on state revenues and expenditures, the new policies show that a positive fiscal policy is still being utilized, and the government is determined to adjust the economic structure.

There’s a classic paradox: When the economy faces downward pressures, market entities will need preferential policies. However, government is less likely to release preferential policies when there are financial pressures that come with the economic downward pressures.

In the past two years, Premier Li did exactly the opposite to break the paradox. He said at the meeting that all these measures are aimed at maintaining a stable growth in the economy and promoting long-term sustainable development.

At the meeting, a person in charge of related matters said the newly released policies will use the “negative list”, which identifies activities and sectors that are off-limits.

“The most important thing is implementation,” the Premier said. “More enterprises should benefit from this.”

“Statistics from the third quarter show that the service industry has become a pillar industry of the Chinese economy,” the Premier said. “Human resource is a big driving power for the development of the Chinese economy.”

Several days ago, Premier Li attended the National Mass Entrepreneurship and Innovation Week and delivered a speech at the launching ceremony. The main venue of the event is Zhongguancun, where a new wave of reform started four years ago promoted by Premier Li.

The Premier said that this series of preferential tax policies can encourage scientific researchers toward more innovations. A large number of research institutions and universities are state-owned and these policies can help revitalize more creativity, the Premier said.