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Can the Policy of Additional Deduction for R&D Expenses Promote the High-Quality Development of China’s Advanced Manufacturing Enterprises?

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  • Huimin Yang

    (Asia Europe Institute, University of Malaya, Kuala Lumpur 50603, Malaysia)

  • Rajah Rasiah

    (Asia Europe Institute, University of Malaya, Kuala Lumpur 50603, Malaysia)

Abstract

Amid China’s economic transition toward high-quality development, the policy of additional deductions for R&D expenses, a key fiscal and taxation tool for incentivizing corporate innovation, has attracted considerable attention for its actual effects on the high-quality development of advanced manufacturing enterprises. Based on a sample of China’s A-share-listed advanced manufacturing enterprises from 2010 to 2024, this study empirically examines how the R&D extra deduction policy influences quality-driven development in high-end manufacturing enterprises, focusing on the mechanistic role of innovation input and output. The results indicate that the R&D tax deduction incentive policy substantially enhances quality-focused growth among high-tech manufacturing companies—a finding that persists after a series of robustness tests. Mechanism tests indicate that the policy promotes high-quality development by incentivizing enterprises to increase innovation input and output. Further analysis reveals a chain mediation effect between innovation input and output. Heterogeneity analysis reveals that the policy has a more significant promoting effect on large-scale advanced manufacturing enterprises and that, with the increasing policy intensity after 2018, its driving force for high-quality development intensified. This study provides micro-evidence for understanding the role of the additional deduction for R&D expenses in the high-quality development of advanced manufacturing enterprises, offering important implications for optimizing innovation incentive policies and promoting the transformation and upgrading of advanced manufacturing.

Suggested Citation

  • Huimin Yang & Rajah Rasiah, 2025. "Can the Policy of Additional Deduction for R&D Expenses Promote the High-Quality Development of China’s Advanced Manufacturing Enterprises?," Sustainability, MDPI, vol. 17(20), pages 1-24, October.
    • Handle: RePEc:gam:jsusta:v:17:y:2025:i:20:p:9226-:d:1773801
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    References listed on IDEAS

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