The SAIC-GM-Wuling automobile plant in Liuzhou, Guangxi province
The SAIC-GM-Wuling automobile plant in Liuzhou, Guangxi province, China. Han reaffirmed policies to forbid forced technology transfers. Image Credit: Bloomberg

Beijing: China’s top officials pledged to lower tariffs and expedite debt sales in 2019 as they seek to manage an economic slowdown while tackling the trade standoff with the US.

The country will continue to cut import taxes and create a first-rate environment for foreign businesses as it opens up the economy, Vice Premier Han Zheng said at the China Development Forum in Beijing on Sunday, without offering details on tariff reduction.

Han reaffirmed policies to better protect intellectual property rights, forbid forced technology transfers and reduce restricted areas for foreign investment toward the level of access in free-trade zones. Meanwhile, the government will speed up bond sales and the use of the funding to boost domestic demand, Finance Minister Liu Kun said at the same event.

2tr

Amount (in yuan) to be reduced in taxes and fees this year

The commitments foreshadow another round of trade talks between China and the US this week, offering a new hint of optimism on a ceasefire between the world’s two largest economies. China’s reiteration of stronger fiscal support implies Beijing is increasingly looking to its domestic market when grappling with a deceleration amid global weakness.

“Fiscal policy will play a bigger role in supporting the real economy” in spite of slowing revenue growth, Liu said, repeating a plan to reduce taxes and fees by at least two trillion yuan ($298 billion) this year. About 70 per cent of the planned cuts will come from taxes while the rest from lower social security premiums and other fee reductions, he said.

The government will have to make better use of its resources and prioritise expenditure on projects such as key infrastructure and improving people’s livelihood, he said.

Authorities will work to complete the issuance of 3.08 trillion yuan of local government debt by September to stabilise investment, while keeping an eye on off-balance-sheet debt that local officials raised via financing vehicles, especially in high-risk areas, Liu added.

Better than expected

A softening economy, muted inflation and measures to contain property bubbles have weighed on revenue growth as well as alternative funding sources such as land sales, prompting Nobel laureate Joseph Stiglitz to urge the government to consider increasing some taxes as it restructures the economy. That could include those on land and capital gains, he said at the forum.

Stiglitz also said more regional banks and a better equity market are needed to reduce the reliance on state lenders.

China lowered the goal for economic growth to a range of 6 to 6.5 per cent for 2019 while pledging a massive package of tax cuts amid other “targeted” measures to address the weakness. The deepening slowdown has pushed unemployment higher, intensifying pressure on that calibrated stimulus strategy.

Economic indicators in the first two months “have come in better than expected,” although the momentum for growth globally is lacking, Ning Jizhe, vice-chairman of the National Development and Reform Commission, said at the forum.

The government will take steps to raise people’s potential for consumption and nurture a strong domestic market, including increasing farmers’ income, he said.