World

Saturday 2 August 2014

China unveils 'mini stimulus' to curb slowing growth

Denise Roland

Published 25/07/2013|13:00

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Chinese Premier Li Keqiang, left, shakes hands with former Chinese Premier Wen Jiabao
Chinese Premier Li Keqiang, left, shakes hands with former Chinese Premier Wen Jiabao

The Chinese government has unveiled a clutch of pro-growth policies in a bid to prevent the pace of economic expansion from falling further.

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The measures come after Beijing faced slowing growth in nine of the past 10 quarters, including the most recent, in which expansion eased to 7pc. Today, a key survey suggested the country's manufacturing sector had contracted at its sharpest pace in nearly a year.

On Tuesday, premier Li Keqiang made a firm pledge that economic growth would not sink below 7pc, in a swivel from a prior government narrative of a controlled slowdown.

In an string of announcements aimed at stimulating business, the government said it would scrap taxes for small firms, encourage bank lending to exporters, and widen funding channels to speed railway investment.

"The economy is still running in a reasonable range. We must look at now and beyond to let restructuring and reform play an active role in stabilizing growth," the cabinet said.

State radio and TV quoted China's cabinet as saying Beijing would exempt 'micro firms' - those with monthly sales of less than Rmb20,000 (€2455) - from business and sales taxes. The move is designed to boost jobs growth among the six million or so companies which fall into this category and already employ tens of millions of workers.

The cabinet also pressed banks to ramp up lending to exporters and said it would cut interest rates on loans to importers. Beijing also announced it would simplify customs clearance procedures, cut administrative fees and provide zero tariffs for services companies which export.

Finally, the government said it would create more funding channels to build railways, especially in the western and poor regions, starting with a new railway development fund which will seek money from private backers to supplement public funds. Beijing also said it would

"[The cabinet] agreed that more efforts should be made to create a fair, open and convenient market environment, motivate market players and enhance construction in weak areas of the economy, so as to ensure that the economy can develop in a sustainable and healthy way," said a government statement according to state news agency Xinhua.

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