China’s central government has unveiled a mini-stimulus plan aimed at shoring up sputtering growth in the world’s No. 2 economy.
Under the measures announced by Chinese Premier Li Keqiang (李克強), small businesses would get bigger tax breaks, social housing would be built to replace shantytowns and railway construction would be accelerated.
Li, China’s top economic official, announced the new measures on Wednesday evening after a regular meeting of the State Council, China’s Cabinet.
The plan comes as signs mount that China’s economy continues to slow, raising fears it may expand less than the 7.5 percent that the nation’s leaders have targeted.
Factory data released earlier this week showed that business conditions in the first quarter of this year remained mostly weak. China’s economy has been decelerating after a decade of rapid and consistent growth, as its leaders try to shift the economy’s focus to domestic consumption instead of trade and investment.
The stimulus announcement “means policymakers don’t want to take the risk of seeing growth slipping to below 7 percent,” HSBC economists Qu Hongbin (屈宏斌) and Sun Junwei (孫俊偉) said in a report. “[China’s] government is clearly signaling that it intends to follow up with real policy actions to maintain growth.”
China’s growth rates remain high compared with the recent sluggish standards of Western nations, but last year’s expansion of 7.7 percent was the slowest in two decades. China’s policymakers are opting for smaller, more finely tuned economic relief measures, rather than the massive spending and borrowing they unleashed following the 2008 global financial crisis. That sweeping stimulus helped China’s economy recover rapidly, but also led to a credit boom that leaders are now trying to corral.
Parts of the package are for the construction of public housing and railways, important parts of China’s broader urbanization drive.
The latest measures call for so-called “slum clearance” to be accelerated. To support related redevelopment projects, the China Development Bank (國家開發銀行) will set up an agency to issue bonds for home financing.
To finance railway construction, Chinese authorities will create a special fund worth 200 billion to 300 billion yuan (US$32.2 billion to US$48.3 billion) a year. They will also issue up to 150 billion yuan of bonds annually and encourage bank loans.
Li reiterated plans to build 6,600km of railway this year, about 1,000km more than was built last year. About 80 percent of that is set be in central and western regions.
Existing tax breaks for small companies would be extended until the end of 2016 and the threshold for smaller companies to pay tax is expected to be raised, although the new level was not specified.
Li’s statement had few other specific details and did not give the overall cost of the package.
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