Chinese policymakers have pledged to step up support for the world’s second-largest economy, which has been hit by the COVID-19 outbreak, triggering severe restrictions, disrupting supply chains and hitting production and consumption.
The State Council said China’s goal is to bring the economy back to normal through a package of targeted, powerful and effective measures.
“At present, the downward pressure on the economy continues to increase, which is very difficult for many market players,” the cabinet was quoted as saying after a regular meeting.
Many private-sector economists expect the economy to contract this quarter from a year earlier, compared with a 4.8% growth rate in the first quarter.
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Among the new measures agreed, the government will provide tax credits to more industries and increase the total annual tax cut by more than 140 billion yuan ($21 billion) to 2.64 trillion yuan, the cabinet was quoted as saying.
China will also reduce the purchase tax on some passenger cars by 60 billion yuan, state media said.
The cabinet said the authorities would defer the payment of social security contributions, including pension insurance premiums, for small businesses, self-employed businesses and some severely distressed industries until the end of the year.
It added that deferred payments this year are expected to reach 320 billion yuan.
More stimulus Last week, China slashed its benchmark mortgage reference rate for the second time this year, as Beijing seeks to revive its troubled real estate sector to boost its economy.
Analysts expect more stimulus, such as the possible issuance of special government bonds to fund fiscal spending, as well as more measures to stimulate consumption in the rest of the year.
“In the second half of this year, the government will continue to launch stimulus packages through monetary and fiscal channels,” Zhu Ning, a professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University, told Reuters at the annual World Economic Forum in Davos.
“There are many options in the toolbox of policymakers.”
Banks will also defer some loan repayments for struggling small businesses and individuals, including auto and consumer loans, the cabinet was quoted as saying.
It added that the National Financing Guarantee Fund will increase its business by more than 1 trillion yuan this year.
The State Council said that China will also launch a number of new projects in water conservancy, transportation, urban shantytown renovation and other areas, as well as some new energy projects.
Cabinet also committed to an orderly increase in domestic and international passenger flights.