Chinese policymakers have pledged to increase support for the world’s second-largest economy, with the Kovid-19 outbreak causing stricter restrictions, disrupting supply chains and hurting production and consumption.
The cabinet said China aims to get its economic activities back on track with a package of targeted, strong and effective measures.
“Currently, downward pressure on the economy continues to grow and it is very difficult for many market entities,” the cabinet said after a regular meeting.
Many private-sector economists expect the economy to shrink this quarter compared to a year earlier, compared to a 4.8% increase in the first quarter.
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Among the agreed new measures, the government will provide tax credit rebates to more sectors and reduce annual taxes by a total of 140 billion yuan ($ 21 billion) to 2.64 trillion yuan, the cabinet was quoted as saying.
China will also cut some passenger cars by 60 billion yuan, state media reported.
Authorities will suspend the provision of social security, including pension insurance premium payments, by small companies, independent businesses and some severely distressed sectors until the end of this year, the cabinet said.
Delayed payments are expected to reach 320 billion yuan this year, it added.
More stimulus measures have been seen in the pipeline
Last week, China cut its benchmark reference rate for mortgages by an unexpectedly wide margin, the second decline this year as Beijing seeks to revive the ailing housing sector to boost the economy.
Analysts expect more stimulus measures, such as the possible issuance of special treasury bonds for financial spending and further measures to increase spending for the rest of the year.
“The government will launch stimulus packages in the second half of this year, both financially and financially,” Zhu Ning, a professor at the Shanghai Advanced Institute of Finance at Shanghai Xiao Tong University, told Reuters at its annual meeting. World Economic Forum in Davos.
“Policymakers still have many options in the toolbox.”
The cabinet was quoted as saying that banks would defer repayment of some loans, including auto and consumer loans, by small companies and individuals in distress.
The National Financing Guarantee Fund will increase its business by 1 trillion yuan this year, it added.
China will launch several new projects in water conservation, transportation and urban Shantitown reform and launch some new energy projects, the cabinet said.
The Cabinet also promised to increase domestic and international passenger flights in an orderly manner.