China Adopts Economic Measures ‘In the Face of External Uncertainties’

FROM EIR DAILY ALERT

China Adopts Economic Measures ‘In the Face of External Uncertainties’

July 24, 2018 (EIRNS)—The Chinese government is moving proactively on economic policy matters, both domestically and internationally, “in the face of external uncertainties,” according to this year’s Government Work Report by Premier Li Keqiang. On the international front, China’s interventions center on the ongoing expansion of the Belt and Road Initiative, especially in Africa around President Xi Jinping’s ongoing tour and the July 25-27 BRICS Summit in Johannesburg, South Africa. On the domestic front, Premier Li Keqiang chaired a July 23 meeting of the State Council’s executive, which issued a series of economic policy directives, according to Xinhua.

“In this year’s Government Work Report, Premier Li Keqiang stressed the need to focus on the real economy and leverage the proactive fiscal policy to tackle the financing difficulties facing small and micro businesses,”

Xinhua reported.

“China will continue with stable macro policies and adopt a combination of fiscal and financial measures in an effort to boost domestic demand and bolster support for real economy ... [although] it will firmly refrain from resorting to a deluge of strong stimulus policies.

“A more proactive fiscal policy will be pursued. The government will focus on introducing deeper tax and non-tax fee cuts, and more companies will be eligible for the preferential policies of the additional deduction of R&D spending in taxable income, a policy which is expected to cut another 65 billion yuan of tax within this year on top of an initial goal of cutting taxes and fees by 1.1 trillion yuan this year. Efforts will be stepped up in issuing the 1.35 trillion yuan of special bonds [about $200 billion] for local government to see more tangible progress on ongoing infrastructure projects.”

Xinhua explained that financial measures will also be taken to further curb speculation and foster real production.

“Financial institutions will also be called on to use the money released from cuts in their required reserves to support small and micro businesses and debt-to-equity swap.... At the same time, the government will resolutely phase out the ‘zombie’ companies to free up their under-used funding, and crack down on illegal financial institutions and activities to forestall risks.”