China to slash taxes, boost lending to prop up slowing economy

China to slash taxes, boost lending to prop up slowing economy

Li said the Chinese government would see tax cuts worth $298 billion to encourage spending as the economy slows.

That compares to the 2018 gross domestic product growth of 6.6 percent, which was the weakest pace since 1990.

To help shore up the economy, China's fiscal policy will become "more forceful", Li said, with the government pencilling in cuts of almost 2 trillion yuan (RM1.2 trillion) in taxes and fees for companies.

The government aims to create more than 11 million new urban jobs this year and keep urban unemployment below 4.5 percent - unchanged from last year.

As the economy slows, the government has unveiled a military budget increase of 7.5 per cent to 1.2 trillion yuan, lower than last year's 8.1 per cent hike.

This year's meeting comes amid tariff tensions with the U.S. - China's largest trading partner - which have placed vast pressure on China's economy and financial markets.

Seeking to defuse U.S. and European complaints the Chinese system is rigged against foreign companies, Premier Li Keqiang promised in a speech to the National People's Congress they will be "treated as equals" with their Chinese competitors.

China's 2018 defense budget accounted for roughly 1.3% of GDP, according to government spokesperson Zhang Yesui on Monday, which is still lower than those of some developed countries, many of whom regularly allocate over 2% of GDP to military spending. The report pledged a "noticeable decrease" in the tax burdens of major industries, with the total of reductions in tax and social security fees coming to 2 trillion yuan.

China's government has trimmed this year's economic growth target to a relatively robust 6 to 6.5 percent amid a tariff battle with Washington and a slowdown in global growth.

China will closely monitor employment at exporting companies heavily exposed to the USA market and cut the value-added tax (VAT) for the manufacturing sector to 13 percent from 16 percent, Li said.

Further cuts to the required reserves ratio for smaller banks are planned, according to the work report.

China aims to increase lending to small companies by large commercial banks by more than 30 per cent this year, the premier said.

Nevertheless, the growth target sets a barometer for China's economic performance not only to outside observers and investors, but also to regional governments and lenders.

Three-quarters of provinces have already lowered their annual growth targets this year. "So where does this threat thing come from?" official news portal China Military Online wrote in a commentary on Tuesday. "They need to strike a balance between boosting economic activity and not restart another debt-fuelled boom".

Meanwhile, US-China trade talks are ongoing and Beijing's work report published on Tuesday stresses the government's commitment to promoting the negotiations and safeguarding economic globalisation and free trade.

Separately, China's top banking regulator said on Tuesday Beijing could "absolutely" reach an agreement with the United States on opening up its financial sector.

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