Beijing bets on $30b tax relief plan to lift economy
Shanghai | China will offer more than 140 billion yuan ($30 billion) in extra tax relief mostly aimed at businesses in a bid to offset the heavy impact of coronavirus lockdowns on the world’s second-largest economy.
The measures include additional tax rebates to companies and cuts of 60 billion yuan on passenger car purchase taxes, China National Radio reported – citing a decision from a meeting of China’s State Council, a top government body, chaired by Premier Li Keqiang.
Economists generally consider that China’s strict COVID-zero policy means the government will not be able to meet its annual GDP growth target of about 5.5 per cent. Getty
The extra tax cuts represent about 0.1 per cent of China’s GDP last year, but push the government’s total planned reduction in taxes this year to 2.64 trillion yuan, slightly more than the relief Beijing offered in 2020 when China was first hit by the pandemic.
The policies are intended to “stabilise” the economy, the meeting said, adding that China would improve policies to help supply chains function, ensure domestic cargo transport ran smoothly and increase the number of domestic flights.
Beijing will also extend an existing delay on companies’ social insurance contributions to the end of the year and expand the measure to more sectors, the report said.
The measure is expected to save companies 360 billion yuan. The meeting also said that a quota for loans aimed at small- and medium-sized enterprises would be doubled.
Regarding the slump in China’s property market, the meeting said it would be up to cities to set their own support measures. The country would also launch a number of infrastructure projects in areas such as water, the renovation of old housing, energy security and underground piping, the meeting said, without giving details.
Fiscal targets unchanged
Beijing has widened the scope of tax relief policies in recent weeks but hasn’t revised its fiscal targets for the year, which were set in early March before the omicron variant prompted a strict lockdown of Shanghai and tight restrictions in other major urban centres.
At that time, the government said it would provide tax relief worth about 2.5 trillion yuan this year, including 1.5 trillion yuan in rebates.
The latest report did not state how the additional tax cuts would be funded, or if they required a revision of Beijing’s official deficit target for the year.
Economists generally consider that China’s strict zero-COVID policy means the government will not be able to meet its annual GDP growth target of about 5.5 per cent.
Bloomberg Economics last week slashed its forecast for
China’s growth forecast has been cut to 2 per cent because of lockdown impacts, Bloomberg Economics said, adding that the US economy may grow faster than China’s for the first time since 1976. Consensus from the latest poll of economists was for the country’s economy to expand 4.8 per cent this year.
China’s financial support for lockdown-stricken areas has mostly gone to companies rather than households, leading prominent economists to call for cash handouts to consumers.
The meeting chaired by Mr Li offered no new direct household support, beyond stating that social insurance payments will be raised in line with consumer price increases.
The nationwide tally of coronavirus cases is starting to trend down, after 802 new infections were reported for Sunday, the lowest in more than two months.
Of its top 50 cities by economic size, only three currently have widespread restrictions in place. However, Beijing and Tianjin tightened restrictions on movement in recent days after recording an increase in cases.
Bloomberg
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