China reveals 3 measures to boost economic growth

To avoid large-scale stimulus spending.

According to BBVA Research, at the conclusion of a meeting of the State Council (China’s cabinet) yesterday, Premier Li Keqiang announced three measures to support growth.

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(i) waiver of value-added and business taxes for select SMEs (those with monthly sales below RMB 20 thousand RMB, equivalent to USD 3.3 thousand effective from August 1;

(ii) support for exports through simplification of customs procedures, cuts in export taxes and fees, and maintenance of exchange rate stability;

(iii) promotion of public-private partnership to invest in railway and city subway systems. Separately, the State Agency for Foreign Exchange (SAFE) announced a simplification of administrative procedures for settlement of trade in services.

The measures are the latest sign of the government’s shift toward growth-supportive measures to achieve the 7.5% growth target for this year.

Notably, the measures aim to improve efficiency, while avoiding large-scale stimulus spending given the limited scope for such measures and the continued focus on curtailing domestic financial fragilities.