China Plans Tax Cuts for Foreign Bond Investors to Aid Growth

(Bloomberg) -- China will exempt foreign institutions from paying some taxes on interest gains in the onshore bond market as part of efforts to support the economy.

The exemption announced after a State Council meeting presided over by Premier Li Keqiang on Thursday covered corporate income and value-added taxes for a period tentatively set at three years. Together with other tax breaks measures announced at the meeting, the cabinet will also cut the financial burden on businesses by a total of 45 billion yuan ($6.6 billion) a year, according to a statement posted on the government’s website.

China is looking to its companies to sustain its economy as a trade dispute with the U.S. simmers and the government tries to lower debt growth. The country’s central bank has been trying to convince banks to lend more, though money hasn’t been feeding into the wider economy and smaller firms are hungry for cash.

The State Council said it would expand the value-added tax exemption on lenders’ interest income for loans to small- and micro-sized enterprises with a credit line of up to 10 million yuan, up from 5 million yuan. The cabinet also said it will raise export tax rebates for some products.

©2018 Bloomberg L.P.