China Spending More on Infrastructure to Help Economy

Chinese Premier Li Keqiang said the nation will speed railway construction, especially in central and western regions, adding support for an economy that’s set to expand at the slowest pace in 23 years.

The State Council also yesterday approved tax breaks for small companies and reduced fees for exporters, according to a statement after a meeting led by Li. China plans a railway development fund, the government said.

Additional spending would help the world’s second-largest economy, after the government signaled this week it will protect its 7.5 percent growth target for this year following a second straight quarterly slowdown. Economists surveyed by Bloomberg News cut expansion forecasts this month, reaching a new median estimate of 7.5 percent, which would be the lowest since 1990.

“Premier Li’s team has been surely working around the clock” to arrest the slowdown, said Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong. “It’s a small stimulus” that may boost confidence while having a limited effect in boosting demand, Lu said by e-mail today.

Resolutions passed at yesterday’s cabinet meeting included the exemption of companies with monthly sales of less than 20,000 yuan from value-added and business taxes starting Aug. 1, according to the statement. The move will benefit more than 6 million small businesses and affect jobs and income of tens of millions of people, the government said.

China will also reduce administrative fees on export inspections and encourage financing and tax-rebate services for small firms to promote trade, according to yesterday’s statement, and will seek a balance of international payments that ensures stability of the yuan exchange rate.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu