China published a series of measures yesterday to boost exports and consumption, marking the latest attempt to tackle the worst economic outlook in a generation.
A hike in tax incentives to exporters of machinery and electronic products were among measures unveiled after a meeting on Wednesday of the State Council, or Cabinet, chaired by Premier Wen Jiabao (溫家寶), the China Daily said.
Participants in the meeting also decided to expand the list of product categories where foreign investment in processing trade is permitted, said the paper, which provided no further details.
As part of the same package, the government will increase subsidies for farmers buying household appliances in a bid to tap the potential of the 800 million consumers living in the countryside, Xinhua news agency reported.
Other measures include money spent on boosting retail outlets in urban and rural areas, Xinhua said.
Evidence has been piling up that China is headed for harder times as its foreign trade sector takes a direct hit from the global crisis.
The nation’s exports dropped 2.2 percent last month from a year earlier, the first decline in more than seven years.
The Chinese economy, on the verge of officially becoming the world’s third-largest, is likely to see growth slow to 7.5 percent next year, the worst performance since 1990, the World Bank said.
Separately, China will use the yuan in transactions with neighboring economies on a trial basis, state media said yesterday, calling it a potential first step to making it an international currency.
The government will allow the yuan to be used in settlements between the Pearl and Yangtze river delta regions — both major industrial areas — and Hong Kong and Macau, the China Daily reported.
Similarly, Yunnan Province and the Guangxi Zhuang region in the south will be permitted to use the yuan in settling trade with ASEAN members.
The initiative emerged from a meeting on Wednesday of the State Council but no details were available on when it would be implemented, the paper said.
“The move will ... increase the yuan’s acceptance in Asia, which will help it become an international currency in the long run,” Zhao Xijun (趙錫軍), a finance professor at the People’s University in Beijing, told the paper.
The vast majority of China’s foreign trade deals are currently settled either in euros or US dollars.
Central bank governor Zhou Xiaochuan (周小川) warned earlier this month that settlements using the US dollar would be problematic if the dollar’s value fluctuated drastically.