China is aiming to boost the economy by tax cuts and infrastructure spending in the billions of dollars range.
Reuters, citing Chinese Premier Li Keqiang, reported the Chinese government is aiming for economic growth of between 6 percent and 6.5 percent this year, which is below the 6.6 percent growth the country reported in 2018. Earlier in the year sources told Reuters China was reducing its growth target for this year because of slowing demand both domestically and around the world and because of the trade war with the U.S.
During a speech in Beijing’s Great Hall of the People, Reuters reported Li laid out the challenges the Chinese economy is facing and vowed to protect it with measures designed to stimulate the economy. He said there are planned cuts of the taxes and fees businesses face of close to 2 trillion yuan or $298.3 billion. “The environment facing China’s development this year is more complicated and more severe,” he said. “There will be more risks and challenges that are either predictable or unpredictable, and we must be fully prepared for a tough battle.”
According to the report, the tax cuts are deeper than the 1.3 trillion yuan made last year. The government in China is looking at reducing taxes to support more manufacturing, construction, and the transport sector. With the Chinese government now forecasting a range of GDP growth this year, it gives lawmakers more room to try different ways to stimulate the economy. It also underscores that officials in the country are still worried about the growth prospects for the Chinese economy, noted the report. “If you are not sick you will not take so many medicines at one time,” Iris Pang, Greater China economist at ING Wholesale Banking, told Reuters. “It means the headwinds have not gone away, they are still there.”
As for the trade war with China, Li said during the speech the government would closely watch companies exposed to the U.S. market and reduce the value-added tax for manufacturing to 13 percent. It was previously at 16 percent. The VAT for transportation and construction industries will be reduced to 9 percent from 10 percent, noted Reuters. Li also said the government will continue to push for trade talks with the U.S. and was committed to free trade and globalization. The government official said China will also expand access for foreign investments and will make it so Chinese and foreign firms are treated equally and that there is fair competition.