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(The Total Investment & Insurance Solutions) |
China plans to slash taxes, step up spending and provide ample
financing to private and small enterprises to help counter the country's worst
slowdown since the global financial crisis and the impact of a bruising trade
war with the U.S.
The People's Bank of China is confident it
can keep the value of China's currency, the yuan, steady while maintaining a
stable but flexible monetary policy, Zhu Hexin, a deputy central bank governor,
told reporters at a briefing Tuesday on plans for 2019 that were set by top
leaders at an annual meeting in December.
The yuan, also known as the renminbi, or
"people's money," sank to a 10-year low of 6.9756 per dollar at the
end of October, coming close to breaking the level of seven to the greenback.
It has strengthened since then to about 6.7580 per dollar.
A further slide in the yuan could fuel U.S.
complaints about Beijing's currency controls. It also might prompt potentially
destabilizing outflows of capital, which would raise borrowing costs and hobble
efforts to shore up growth.
In July-September, China's economy expanded
at a post-crisis slow annual pace of 6.5 percent despite government efforts to
stem the downturn by ordering banks to lend more and by boosting spending on
public works construction.
The government reported on Monday that
China's exports to the U.S. slipped in December as the delayed impact of
President Donald Trump's tariff hikes on Chinese products began to pinch
demand. China's trade surplus with the U.S. surged to a record $323.3 billion
in 2018.
World markets tumbled in response, but
recovered on Tuesday after the news conference in Beijing, with Hong Kong's
Hang Seng jumping 1.8 percent while the Shanghai Composite index climbed 1.2
percent.
Sales to the U.S. market had kept growing by
double digits in previous months as Chinese exporters rushed to fill orders.
But forecasters said American orders would slump once the full impact of
Trump's penalties hit. Global demand has also moderated.
The slump in exports adds to pressure on
Beijing to resolve the dispute with Washington over Chinese technology
policies. U.S. and Chinese officials ended a three-day negotiating session last
week with no sign of agreements or word on what their next step would be.
The plans for 2019 outlined Tuesday included
specific measures such as raising the maximum income levels for tax exempt
companies and individuals and reducing the tax rate.
The government plans to begin construction of
major projects and promote settlement of rural migrants in cities, slash
bureaucratic and anti-competitive red tape, cut energy consumption and open
more business areas to foreign investment, said Lian Weiliang, vice chairman of
the National Development and Reform Commission, China's planning agency.
"We will do our best in the spirit of
getting it nailed down to ensure that the economy gets a good start in the
first quarter and keep it within a reasonable range throughout the year,"
Lian said.
Xu Hongcai, an assistant minister of finance,
said the scale of tax reductions for the year would be about 1.3 trillion yuan
($190 billion).
"The focus is on enhancement and
efficiency," Xu said.
China's communist leaders have been trying to
guide the economy toward a more sustainable mode of growth in recent years by
reducing reliance on massive investments in infrastructure and on export
manufacturing and expanding the services sector and private consumption.
It's a balancing act that requires just
enough spending and access to credit to support businesses without setting off
inflation and driving asset prices perilously higher.
Zhu said the central bank would keep monetary
policy sound, "forward-looking, flexible and pertinent."
It's unclear if that will suffice to keep
manufacturing on an even keel as Beijing and Washington work to resolve their
trade disputes.
Trump and Chinese President Xi Jinping agreed
on Dec. 1 to postpone additional tariff hikes by 90 days while they negotiated.
But the penalties of up to 25 percent already imposed on billions of dollars of
each other's goods remain in place, raising the cost for American and Chinese
buyers of soybeans, medical equipment and other goods.The Total Investment & Insurance Solutions
