Chinese Finance Minister: "Expand Tax Reduction Scale This Year to Prevent Economic Slowdown"

Liu Kun, Chinese Minister of Finance
Photo by Reuters Yonhap News

[Asia Economy Reporter Park Byung-hee] Liu Kun, China's Minister of Finance, said on the 22nd that the Chinese government will significantly increase the scale of tax cuts this year to prevent an economic slowdown.

According to major foreign media, Minister Liu said at a press conference held in Beijing on the same day that the scale of tax and fee reductions this year will be larger than last year's 1.1 trillion yuan (207.57 trillion won), without specifying the exact amount.

Minister Liu also stated that grants to local governments will increase significantly. He explained that since tax cuts reduce local government revenues, the central government will increase grants to compensate for the loss in tax revenue.

He said, "A substantial part of the reduction in local government tax revenue due to tax cuts can be offset by grants transferred to local governments."

Minister Liu particularly mentioned that grants will be increased for less developed local governments and those facing economic difficulties. He explained that the large-scale tax cuts are measures to prevent an economic slowdown.

China's economic growth rate has sharply slowed since the second half of last year. The economic growth rate was 18.3% in the first quarter of last year but slowed to 7.9% in the second quarter, with growth rates of 4.9% and 4.0% in the third and fourth quarters, respectively.

Yi Gang, governor of the People's Bank of China, the country's central bank, also said last week ahead of the G20 finance ministers and central bank governors meeting, "We will maintain an accommodative monetary policy stance this year to prevent an economic slowdown."

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