China will push forward a proactive fiscal policy, including further tax cuts, and boost government expenditures to ease downward economic pressure amid Sino-US trade tensions, Finance Minister Liu Kun told China Daily in an interview on Sept 25.
The proactive policy stance, however, does not mean massive economic stimulus measures, he said.
“We are studying measures to further cut taxes and reduce fees, aiming to ease the burden in the corporate sector,” Liu said. “A special deduction plan for personal income tax is also being researched to increase individual incomes and boost consumption.”
The total tax cut this year is expected to exceed 1.3 trillion yuan ($189 billion), higher than the 1.1 trillion yuan tax cut target set at the beginning of this year, the minister said.
Additional government spending, in the meantime, will support key construction projects and improve people’s livelihoods, although fiscal income growth is likely to slow down in the second half of this year, Liu said.
To better use government money and make spending more efficient in key areas, the country aims to build a comprehensive budget performance management system in three to five years to monitor revenues and expenditures of governments at all levels, according to a regulation document released by the Central Committee of the Communist Party of China and the State Council on Sept 23.
The regulation will apply to budgets for general public finances, government managed funds, State capital operations and social insurance funds. All major policies as well as investment and financing projects will be evaluated during the process.
“The Finance Ministry will coordinate with other government departments to implement the regulation,” Liu said.
According to data from the ministry, as of Sept 26, newly issued general local government bonds have reached 91.8 percent of their annual quota, and 85 percent of special-purpose local government bonds have hit their ceiling.
So far this year, the central government has spent 409.4 billion yuan on infrastructure construction, accounting for 94.2 percent of the annual budget. The projects focus on infrastructure featuring innovation and environmental protection.
Addressing the rising trade tensions between China and the United States, the minister said, “We have taken targeted countermeasures in compliance with WTO rules to protect free trade and the multilateral mechanism.”
For companies that have been influenced by the tensions, the ministry has launched measures, including those to coordinate and solve problems related to exports, and supports staff retraining and internal personnel transfers to ease unemployment pressure.
This year, the US has already imposed additional tariffs on $250 billion worth of Chinese goods and threatened to sharply escalate trade frictions.
“What the US has done has harmed the interests of Chinese companies and foreign companies in China. It has also led to distortions in the world economy, as well as shaken confidence in the global economic outlook,” Liu said.
“China’s macroeconomic indicators, however, remain stable at the moment, with the GDP growth rate in the range of 6.7-6.9 percent for 12 quarters running. I believe Chinese companies and foreign companies in China will achieve better development,” he added.
