The VAT Sharing Reform as an Incentive: How China’s Manufacturing Sector Returned from the Fictitious Economy to the Real Economy

Constructing a modern industrial system anchored in the real economy constitutes a core requirement for industrial development in the new era. Guiding manufacturing enterprises to “return from fictitious to real” is of great significance for boosting real investment and promoting the development of the real economy. This paper takes the value-added tax sharing reform in 2016 as the research background and uses an intensity difference-in-differences model to analyze the promoting effect of prefecture-level city governments’ manufacturing development orientation on returning from the fictitious economy to the real economy of manufacturing enterprises under tax sharing incentives. Research finds that the sharing incentives significantly promote the process of listed manufacturing companies returning to the real economy, manifested by a decrease in the level of financialization. The study points out that local governments have markedly intensified their focus on manufacturing development under this incentive, providing targeted support through fixed-asset investment, land transfers and preferential tax policies. Under such government guidance, manufacturing enterprises have strengthened long-term value orientation, effectively curbing managerial speculation for personal gain. This has reduced investments in speculative financial assets and property holdings while stimulating growth in productive capital expenditure and core business operations. This is the main factor driving enterprises to return from the fictitious economy to real economy operations. This study provides experiential reference for promoting the development of the real economy and advancing the construction of a modern industrial system.