BEIJING (Reuters) – China will cut billions of dollars in taxes and fees, increase infrastructure investment, and step up lending to small firms, Premier Li Keqiang said on Tuesday, as the world’s second-largest economy looks set to slow further this year.
Chinese President Xi Jinping and Chinese Premier Li Keqiang arrive for the opening session of the National People’s Congress (NPC) at the Great Hall of the People in Beijing, China, March 5, 2019. REUTERS/Jason Lee
The government aims to expand its economy by 6.0 to 6.5 percent in 2019, Li said at the opening of the annual meeting of China’s parliament, less than the gross domestic product growth of 6.6 percent reported last year.
Sources told Reuters earlier this year that China would cut its 2019 growth target to 6.0 to 6.5 percent from the 2018 target of 6.5 percent amid growing economic headwinds.
Adopting a target range rather than a single growth figure gives policymakers room to maneuver as economic uncertainties in China grow.
GDP last year expanded at its slowest pace since 1990 due to the trade war and Beijing’s crackdown on financial risks, which raised corporate borrowing costs and hurt investment.
A longer-term campaign to curb polluting and low-value industries also slowed China’s vast manufacturing sector.
To help shore up the economy, China’s fiscal policy will become “more forceful”, Li said, with the government penciling in cuts of nearly 2 trillion yuan ($298.31 billion) in taxes and fees for companies.
Value-added taxes will also be reduced to support the manufacturing, transport and construction sectors.
With the economy losing steam, China’s top leaders are closely watching employment levels as factories could be forced to shed workers, despite a more resilient services sector.
China will monitor more closely the job situation at exporting companies heavily exposed to the U.S. market, Li said.
The government aims to create more than 11 million new urban jobs this year and keep the urban unemployment rate within 4.5 percent, he added, unchanged from its 2018 goals.
Beijing has lowered reserve requirements for commercial lenders five times in the past year to spur loans to small and private companies – vital for growth and jobs.
China last year also cut taxes and fees worth 1.3 trillion yuan and allowed local governments to issue 1.35 trillion yuan in special bonds to fund key projects.
This year, the government has set a budget deficit target of 2.8 percent of GDP, up from last year’s 2.6 percent, reflecting lower tax revenue and higher government spending.
The government has also set a consumer inflation target of around 3 percent, Li said in his report at the opening of the National People’s Congress (NPC) on Tuesday, despite a recent softening in price rises to less than 2 percent, leaving space for Beijing to stimulate consumption.
(GRAPHIC: China’s economic trends – tmsnrt.rs/2iO9Q6a)
Reporting by Kevin Yao, Lusha Zhang, Min Zhang, Stella Qiu, Hallie Gu, Muyu Xu, Cate Cadell, Xiaochong Zhang, Tom Daly, Yilei Sun, Pei Li, Norihiko Shirouzu, Se Young Lee, Yawen Chen, Dominique Patton, Tony Munroe and Ben Blanchard; Writing by Ryan Woo; Editing by Shri Navaratnam and Sam Holmes