People wearing face masks to prevent the spread of coronavirus disease (COVID-19) walk across a street near a shopping mall in Beijing, China, April 15, 2022. REUTERS/Tingshu Wang
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BEIJING, May 24 (Reuters) – China will expand tax credits, postpone social security payments and loan repayments, launch new investment projects and take other steps to support the economy, the official Xinhua news agency quoted the cabinet as saying on Monday.
Chinese politicians have pledged to ramp up support for the world’s second-biggest economy, which has been hit by COVID-19 outbreaks that have led to tight restrictions, disrupted supply chains and hit production and consumption.
China aims to get its economic activity back on a normal path with a package of targeted, vigorous and effective measures, the cabinet said.
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“The downward pressure on the economy is currently increasing and it is very difficult for many market participants,” the cabinet was quoted as saying after a regular meeting.
Many private sector economists expect the economy to contract year-on-year this quarter, compared with first-quarter growth of 4.8%.
Under the new steps, the government will grant tax credits to more sectors and increase annual tax cuts by a total of more than 140 billion yuan ($21 billion) to 2.64 trillion yuan, the cabinet was quoted as saying.
China will also cut some taxes on passenger car purchases by 60 billion yuan, state media said.
Authorities will postpone Social Security payments, including pension insurance premiums, from small businesses, individual businesses and some hard-hit sectors until the end of this year, the cabinet said.
The deferred payments are expected to reach 320 billion yuan this year, she added.
China will add 150 billion yuan in emergency loans to the struggling aviation sector and help the sector issue 200 billion yuan in bonds, along with a move to issue 300 billion yuan in bonds to finance railway construction, the cabinet said.
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Analysts expect further stimulus moves, such as the potential issuance of special government bonds to fund household spending, and further measures to boost consumption over the rest of the year.
“The government will continue to roll out stimulus packages in the second half of this year, both through monetary and fiscal channels,” Zhu Ning, a professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, told Reuters at the annual meeting of the World Economic Forum in Davos.
“There are still many options in the political toolbox.”
The Cabinet was quoted as saying that banks would also delay the repayment of some loans, including car and consumer loans, by struggling small businesses and individuals.
The national financing guarantee fund will boost its business by over 1 trillion yuan this year, he added.
China will also launch a series of new projects in water conservancy, transportation and renovation of urban shantytowns, and launch some new energy projects, the cabinet said.
The cabinet also pledged to increase domestic and international passenger flights in an orderly fashion.
($1 = 6.6470 Chinese renminbi yuan)
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Reporting by Kevin Yao and Beijing Newsroom; Additional reporting by Divya Chowdhury in Davos, editing by Philippa Fletcher, Tomasz Janowski and Hugh Lawson
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