China is making efforts to shore up its slowing economy through billions of dollars in planned tax cuts and infrastructure spending. The economic growth of the country is at its weakest in nearly 30 years because of softer domestic demand and a trade war with the United States of America.
The Chinese government is aiming for economic growth of 6.0 to 6.5 percent this year. Today, at the opening of the annual meeting of China’s parliament, Premier Li Keqiang said that less than the 6.6 percent gross domestic product growth was reported in 2018.
Earlier this year, some sources informed Reuters that China would lower its 2019 growth target to 6.0 from 6.5 percent from the 2018 target of approximately 6.5 percent as both global and domestic demand waned and the trade war with the US intensified economic risks.
Talking in the Great Hall of the People in Beijing, Li warned about the challenges that the second-largest economy in the world faced and promised to keep it on a safe footing with a series of stimulus measures.
He stated: “The environment facing China’s development this year is more complicated and more severe.”
He added: “There will be more risks and challenges that are either predictable or unpredictable and we must be fully prepared for a tough battle.”
Li said that the fiscal policy of China would become “more forceful,” with planned cuts of almost 2 trillion yuan ($298.3 billion) in fees and taxes for firms.
Those tax cuts are more aggressive as compared to the 1.3 trillion yuan that was delivered last year. It will also include reductions that are aimed at supporting the transport, construction, and manufacturing sectors.
Last year, the GDP of China expanded at its slowest pace since 1990 because of the trade war and the crackdown of Beijing on financial risks, which increased corporate borrowing costs and affected investment.
Analysts say that the move of Beijing to adopt a GDP target range, instead of a single growth figure, gives policymakers some room to manoeuvre. However, the increase in planned fiscal stimulus indicates an explicit acknowledgement that authorities continue to be concerned about growth.
A Greater China Economist at ING Wholesale Banking, Iris Pang, stated: “If you are not sick you will not take so many medicines at one time.”
She added: “It means the headwinds have not gone away, they are still there.”