China businesses offer mixed reaction to VAT cut as exporters still call for more help amid slowdown
- New 13 per cent value-added tax rate announced by Premier Li Keqiang on Tuesday still higher than in competitors across Asia like Vietnam, South Korea and Indonesia
- Exporters remain under heavy pressure from lack of access to credit and the impact of US-China trade war
China’s cut in the value-added tax rate provided an immediate boost to corporate confidence amid the slowing economy, but exporters said that they still need more help from the government to offset their lack of access to credit and the effects of the continuing US-China trade war.
The government is redoubling its efforts to this year to stabilise the economy, but is relying on fiscal policy, rather than monetary stimulus, to boost growth.
Tax cuts are one of the most powerful weapons Beijing can bring to bear to boost activity, although budget contrasts limit how much the government can trim levies.
The government has targeted the tax cuts to those sectors hit hardest by the economic slowdown.
Its move would be to cut the value-added tax (VAT) rate for manufacturers from 16 per cent to 13 per cent this year, Premier Li Keqiang announced on Tuesday.
China will also cut the VAT rate for transport and construction firms from 10 per cent to 9 per cent and offer more tax rebates to some service sector firms, whose current 6 per cent VAT rate will remain unchanged.
