The Chinese government has cut taxes and fees this year totaling 1.17 trillion yuan ($170 billion) by June, completing more than half of the 2 trillion yuan annual tax and fee reduction target, the country’s tax authority reported on July 23.

The easing of tax and fee burdens has boosted enterprises’ investment and encouraged consumption, which supported stable economic growth in the first six months, Cai Zili, director of the Property and Behavior Taxation Department of the State Taxation Administration (STA), said at a news conference.

Individual income tax declined by 30.6 percent year-on-year from January to June, accounting for the largest drop among major taxes, due to the reform of the individual income tax system last October and the introduction of special deductions in January, said the STA.

The value-added tax reform saved businesses around 436.9 billion yuan by the end of June, while small and micro enterprises have saved a total of 116.4 billion yuan because of the newly introduced tax cut policy, according to the data.

“Tax cuts have directly resulted in the decline of the government’s income,” said Cai. “As a larger scale of tax and fee cuts has taken effect, tax income in the first half has slowed down remarkably.”

The STA showed that tax income in the first half increased by 1.4 percent from a year earlier, which was 13.9 percentage points lower than that in the same period in 2018.

Cutting taxes and fees by 2 trillion yuan was the Chinese government’s full-year target, as the major measure of a proactive fiscal policy to stabilize economic growth.

The world’s second-largest economy expanded 6.3 percent in the first half, in line with the government’s annual target of 6 to 6.5 percent, although it slowed from the first quarter’s 6.4 percent, the National Bureau of Statistics reported last week.

Economists expected that the Chinese economy may remain mired in domestic and external headwinds, and the authorities are likely to take more proactive measures, on both the monetary and fiscal fronts, to stabilize the growth trend.

“Stabilizing the economy in the short term is the top concern for policymakers,” said Wang Shengzu, co-head of Investment Strategy Group Asia, Goldman Sachs.

Besides tax and fee cuts, reserve requirement ratio cuts and lower market interest rates are the policy choices for the Chinese central bank, he said.

“The Fed’s possible rate cuts could take some pressure off China if the People’s Bank of China decides to follow suit and ease further, which we believe is very likely.”

Shen Jianguang, vice-president and chief economist at JD Digits, a fintech company, said that based on the proactive fiscal policy, more policies to boost consumption and support infrastructure construction are expected in the second half.