A man flies a kite on the Bund while buildings of Pudong’s Lujiazui financial district stand across the Huangpu River as the sun rises in Shanghai, China (Photographer: Qilai Shen/Bloomberg)  

China Vows Tax Cuts on Larger Scale to Support Economy

(Bloomberg) -- China will cut taxes “on a larger scale” to help support its slowing economy, according to senior economic policy officials.

  • The government will continue to cut taxes, especially for small businesses and the manufacturing sector, according to a statement distributed to reporters before a press conference with Zhu Hexin, deputy governor of the People’s Bank of China, Xu Hongcai, assistant minister at the Ministry of Finance and Lian Weiliang, vice chairman of the National Development and Reform Commission on Tuesday.

Key Insights

  • China confirmed more supportive measures coming in 2019 to stabilize the economy, according to agreements reached by top leadership at a economic work conference last month
  • There’s little sign that the incremental stimulus so far has turned around sentiment in the real economy, which could register the slowest growth in nearly three decades in data scheduled for release next week
  • China will avoid a ‘flood’ of liquidity, and will maintain a stable macro-leverage ratio, the PBOC’s Zhu said at the press conference. The central bank will also work more to improve policy transmission and guide funding costs lower, he said
  • Being prudent doesn’t mean the central bank can’t tweak monetary policies, Zhu said, adding that China’s policy will offer “enough” support to the economy
  • China’s new yuan loans in 2018 increased 2.64 trillion yuan from the previous year to 16.17 trillion yuan, according to a statement by the PBOC before the press conference, signaling that December lending exceeded most economist estimates
  • China’s loans to small and medium-sized enterprises rose 17.1 percent in the Jan-Nov period over a year ago, according to the PBOC statement
  • China to take measures to stabilize auto consumption, according to a statement by the NDRC before the press conference

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