SHANGHAI, July 25 – China has unveiled moves to boost growth, including reducing taxes on small firms, as a slowdown in the world’s number two economy shows no sign of abating.
Chinese Premier Li Keqiang announced the measures, including encouraging railway construction and foreign trade incentives, at a cabinet meeting on Wednesday, according to a government statement issued late that evening.
Analysts hailed the moves as a mini stimulus but investors were unimpressed, sending the stock market down 0.60 percent on expectations the measures are unlikely to arrest slowing growth.
China’s economy expanded 7.5 percent year on year in the April-June period, slowing from 7.7 percent in the previous three months, raising worries the world’s second largest economy could be headed for a sharp downturn.
On Wednesday, HSBC’s preliminary purchasing managers’ index for July a closely watched gauge of manufacturing activity contracted to an 11 month low.
Among the moves, small firms with monthly sales of less than 20,000 yuan ($3,260) will be exempt from paying turnover tax and value added tax (VAT) from August 1, the statement said.
“Small businesses are playing an important role in promoting economic development and market prosperity as well as expanding employment,” it said.
VAT is levied on the difference between a commodity’s retail price and its cost.
The tax exemptions will benefit more than six million small companies, the statement said.
The government will also set up a fund for railway development and keep the yuan’s exchange rate at a “reasonable” level to boost international trade, it said.