China promises policy measures to support economy, cut value-added tax rates, says premier Li Keqiang

Following the conclusion of the annual Parliament meeting on Friday, China’s premier Li Keqiang said in a post-event news conference the country would be cutting value-added tax (VAT) for manufacturing and other sectors on April 1. The announcement was among other broad policy measures announced by the country while it deals with downward growth pressures.

The VAT cuts are efforts from the Chinese government to spur economic growth. Last year, China slipped to the lowest annual growth rate since the 1990s while its fourth quarter performance was the weakest since the global financial crisis, as domestic and foreign demand slackened amid the country’s trade conflict with the United States (US).

China had mentioned in a work report delivered last week that the VAT for the manufacturing sector will be cut to 13% from 16%. VAT for the transport and construction sectors will be reduced to 9% from 10%.

China is targeting a 6.0% to 6.5% economic growth this year. The performance will be lower than last year’s 6.6%, a number that is according to Mr Li a “hard won” performance.

The country will also be supporting the economy with a slew of other policy measures such as cutting social security fees, and roll out more stimulus measures to ease the strain on businesses and consumers.

The country can use reserve requirements and interest rates to support economic growth, said Premier Li, promising broad policy measures to navigate the country out of trepid waters.

China’s economic demand for this year is expected to cool further due to softer domestic demand and a trade war with the US.

‘Of course, we are faced with many uncertain factors this year. We have to prepare more, and we have reserved policy room (to address uncertainties),’ Mr Li told reporters at the news conference.

Foreign investment law underway, trade talks slow down

The country is committed to ensure that its new foreign investment law is a meaningful milestone as it opens up to the world, Mr Li added.

In the upcoming months, the government will be taking concrete steps to lay out the details on the new law, a move which signals to the world and the US that it will be protecting the rights and interests of foreign investors.

Mr Li told reporters in the conference he hopes the trade talks between the US and China can achieve results, adding that the common interests between both nations far outweigh the disputes.

A trade summit originally expected to take place this year has been postponed to at least April, news reports said today.

It seems China is holding back on the meeting as a precaution from ending up with a failed meeting, as witnessed from the failed denuclearization talks last month between North Korean leader Kim Jong Un and US president Donald Trump.

US’ president Trump claims he is in no hurry to rush to complete the trade deal.