Opinion | Trade war spurs Li Keqiang to offer business incentives
- The showdown helped shape the premier’s work report with references to challenges and risks but besides the tax cuts and help for the private sector, there was emphasis on the importance of investment in research
A gross domestic product target of 6-6.5 per cent, a softening of last year’s 6.6 per cent growth that leaves the central government with room to move, may have grabbed the headlines.
But it was the United States-China trade war that framed the opening session of the National People’s Congress.
It helped shape Premier Li Keqiang’s annual government work report, from the hurdles the economy faces and the way forward to overcoming them by increasing the role of the market and private sector.
Both the report and the annual budget showawareness of the impact of the trade war on a slowing economy. The report is sprinkled with references to challenges, difficulties and risks, as it rolls out policy solutions featuring 30-odd mentions of “reductions” of taxes, fees and charges to help the economy meet these threats.
Instead of resorting to the debt-fuelled stimulatory spending of the past, tax cuts are the key.
Most eye-catching is a near one-fifth cut in value-added tax for the manufacturing industry from 16 to 13 per cent, followed by a reduction from 10 to 9 per cent for the transport and construction sectors. The prospect of reductions in electricity charges, highway tolls and the like enhances the gains.
