China’s State Council has announced that it will be targeting more spending in infrastructure to boost growth, as it expressed concerns of slowing growth and a faltering economy. The spending moves include building more railways, and upgrading low-income housing, as well as a tax-relief scheme for small businesses.
China’s target for economic growth this year is 7.5 percent, marginally lower than last year’s recorded 7.7 percent, and drastically lower than what was recorded just a few years ago. Though no concrete figures were released, the measures are not likely to be anywhere near as large as the four trillion yuan packaged rolled out in 2008, which helped China buck the trend of global recession and grow over 9.2 percent the following year.
Though no concrete figures were released, the measures are not likely to be anywhere near as large as the four trillion yuan packaged rolled out in 2008
The State Council’s statement, seen by Xinhua, details plans for raising the tax threshold significantly above the current 60,000yuan level, in order to boost micro and small businesses.
The government will be prioritising expanding railways to central and western regions of the country, and over 6,600km of new lines will open this year, over a thousand more than in 2013.
And in order to keep developing the network, the government has announced the launch of a railways development fund, which will be open to social investment.
“The fund’s value is expected to reach 300bn yuan, and up to 150bn yuan of railway bonds will be issued this year,” said the State Council in a statement in Xinhua. “The government will encourage banks to fund railway construction.”
Though the measures are expected to help China sustain growth, analysts are expecting further measures to be announced in the form of looser monetary policy.
“We consider the news of the announcement the lessening of the likelihood of a resort to go-stop monetary policy, which is positive for EM risk assets,” Tim Condon, Asia Economist at ING told CNBC.
However, despite addressing the need to “further innovate the means and measures of macroeconomic control,” the State Council did not elaborate as to how this might be achieved or if any concrete measure were in the pipeline.
“It’s a bit of a rerun of what we saw last year—something less than a stimulus package and more of piecemeal measures to ensure they reach their growth target,” Mark Williams, economist at Capital Economics in London, told the WSJ.