Tax and Fee Reductions and Corporate Financial Decisions: A Case Study of SANY Heavy Industry

Abstract

In the past decade, China has implemented large-scale tax and fee reduction policies to revitalize the real economy. However, how these policies affect the transmission mechanism between corporate financing costs and capital structure has not been fully understood in industries that are capital intensive and have strong cyclical characteristics. This article adopts an exploratory single case study design, taking the financial data of Sany Heavy Industry from 2016 to 2025 as the object, to examine the financial performance of tax reduction and fee reduction policies in the entire industry cycle. The analysis focuses on core indicators such as operating cash flow, tax refunds, interest expenses, leverage ratio, and debt structure. Research has found that tax reduction and fee reduction can provide meaningful liquidity support and enhance internal financing capabilities for enterprises during industry downturns, which is in line with the expectations of the pecking order financing theory. However, it cannot hedge the dominant impact of industry cycles, nor can it automatically reduce bank credit costs. This is evidenced by the fact that from 2022 to 2023, Sany Heavy Industry received large tax refunds while interest expenses increased. In addition, short-term liquidity relief is not equivalent to optimizing long-term capital structure. If the funds saved by tax incentives are used for long-term investment and short-term debt is mismatched, it may actually exacerbate the risk of maturity mismatch. Based on the above findings, this article proposes countercyclical adjustment suggestions for the coordinated efforts of fiscal policy and financial policy, as well as strategies for matching investment and financing periods and optimizing capital structure at the enterprise level. This case study provides practical insights into financial management for manufacturing enterprises in cyclical fluctuations, and provides reference for policy design to improve the transmission of tax reduction and fee reduction to reduce actual financing costs. At the same time, it points out the direction for future research using first-hand data and multi case comparative studies.