Tuesday, August 4, 2015   

Analysts welcome China stimulus measures including tax breaks
(04-03 12:38)

China has announced measures to boost slowing growth, including extending tax breaks for small businesses and support measures for poor urban districts.
The State Council, announced the mini stimulus late Wednesday after a meeting chaired by Premier Li Keqiang.
Li said last month that China had set its annual growth target at “around'' 7.5 percent, the same level as the goal for last year, after gross domestic product grew an annual 7.7 percent in 2013, the same as in 2012.
“The State Council is responding to the growth slowdown by announcing tax breaks for SMEs [small and medium enterprises], speeding up investment in railways and rebuilding urban shantytowns,'' HSBC economists Qu Hongbin and Sun Junwei said in a report today.
“This time the package is small in scale, but it is more targeted and involves reforms on financing to secure funding,'' they said. “So this should help China to smooth growth without exacerbating financial stability risks.''
The tax breaks for “small and micro'' companies will be extended until the end of 2016, the State Council said in a statement on the central government website.
It also said 6,600 kilometers of new railway lines will come into operation this year, 1,000 kilometers more than in 2013.
The plan will also proposes the creation of a railway fund that will receive between 200-300 billion yuan each year, the statement said.
However, there was no mention of plans for monetary policy, such as a reduction in the amount of cash banks must keep in reserve, a cut in interest rates or a drive to get banks lending more.
Xinhua quoted officials at the meeting as saying the government will take other steps this year including stimulating enterprises and boosting domestic consumption and employment.
“These measures show that Premier Li's government aims to stabilize short-term growth with policies which can enhance efficiency while avoiding future financial troubles,'' Bank of America Merrill Lynch economists Lu Ting and Sylvia Sheng said in a report Wednesday.
“We believe these measures are the right policy responses to the 'fiscal cliff' as a consequence of the anti-corruption campaign, and we think markets will overall welcome them.''

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