China tax cuts to aid economic stability
One of the crucial aims of China's tax cuts is to support employment, according to Premier Li Keqiang.
Shanghai - Premier's comments come amid growing official concern over slowing growth and impact on labour market
Published: Sat 12 Jan 2019, 6:01 PM
Last updated: Sat 12 Jan 2019, 8:03 PM
China's plans for tax cuts targeting smaller companies will help to support employment and economic stability, and will expand the country's tax base over the long term, Premier Li Keqiang was quoted as saying on Saturday.
"Implementing tax cuts for small and micro enterprises is mainly to support employment," Li said in comments posted on the Chinese government's website.
Developing and strengthening small companies is linked to economic stability and stable employment, he said.
"Looking at the long term, this will continue to expand the tax base, conserve tax resources and ultimately achieve wins for mass employment, corporate profits and fiscal revenues," he was quoted as saying, referring to the corporate tax cuts.
Li's comments come amid growing official concern over China's slowing economic growth and its impact on the labour market.
Chinese authorities plan to set a lower economic growth target of 6 to 6.5 per cent in 2019, compared with "around" 6.5 per cent in 2018, sources told Reuters, as weakening domestic demand and a damaging trade war with the United States drag on business activity and consumer confidence.
Analysts expect that China's economy grew around 6.6 per cent last year, its slowest pace since 1990, and it is expected to cool further in coming months before a slew of support measures start to kick in.
"The bottom line for the policymakers is social stability, which is crucially tied to the unemployment rate and job creation," analysts at Bank of America Merrill Lynch said in a recent note. "With US-China trade risks still looming large, we believe policymakers would not hesitate to take pre-emptive measures to stabilise expectations on job stability."
More growth boosting steps are expected this year as policymakers seek to avert the risk of a sharper slowdown.
China's State Council, or cabinet, said on January 9 that it would further reduce taxes for smaller companies.
On Friday, Finance Minister Liu Kun said authorities would step up tax and fee cuts to lower corporate burdens.
Market inflows could double
Meanwhile, the inclusion of Chinese A-shares in global stock indexes could see foreign inflows into China's stock market double in 2019, the Shanghai Securities News quoted a top Chinese securities regulator as saying on Saturday.
"Last year, net foreign stock market inflows reached 300 billion yuan [$44.38 billion] and this year we estimate that inflows will increase further. We could expect 600 billion yuan," Fang Xinghai, vice-chairman of the China Securities Regulatory Commission was quoted as saying at a market forum.
It did not say where the forum was taking place.
Fang said that in addition to the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programmes, the stock inflows would be driven by a boost in the proportion of A-shares included in MSCI global indexes, as well as the inclusion of A-shares in FTSE Russell and Dow Jones indexes.
Fang also said that a number of US, Japanese and European investment banks had applied to raise their stakes in domestic brokerages to 51 per cent.