China on Monday said it would take ‘targeted steps’ to revive and support the world’s second largest economy as it struggles to deal with a resurgence of Covid cases that have prompted stringent lockdowns, disrupted industrial and manufacturing activities, and affected global and domestic supply chains and consumption. The measures – totalling tens of billions of dollars – include stimulus for companies, unemployment benefits, boost to infrastructure. Goldman Sachs has said it is lowering China’s 2022 GDP growth forecast from 4.5 per cent to four per cent due to Covid damage in Q2 of this year.
Here are the some of steps to be taken:
Fiscal push & financial support for citizens
> Extend value added tax (VAT) rebates to more industries; this is expected to increase tax refunds by over 140 billion yuan.
> Policy allowing small businesses in five Covid-hit industries to defer some social insurance payments till end-2022; this will result in 320 billion yuan worth of deferred payments.
> Also, provision of incentives like subsidised social insurance contributions for small businesses that hire graduates, and benefits for unemployed and low-income individuals.
> Cash subsidy to be extended so struggling companies – including those part of a state-run unemployment insurance scheme – can retain employees.
> Funds for scheme to support financing of small and agricultural businesses to be increased by over 1 trillion yuan this year.
> China’s central bank will double funding to banks to encourage lending. Also, banks deferring interest payments on small business and consumer loans, and payments on 90 billion yuan in commercial truck loans, to be supported.
To improve supply chains
> Pledge to keep freight logistics smooth, drop restrictions on movement of trucks in regions with low-risk of outbreaks and scrap certain fees and requirements, like height limits.
> Free Covid tests for drivers of passenger and cargo vehicles when traveling to other regions.
> Emergency loans to airlines to be increased by 150 billion yuan and support in issue of 200 billion yuan in bonds, and a plan to increase domestic and international passenger flights.
> Measures to facilitate travel of foreign companies’ employees; this is significant given reports Apple is considering shifting some of its production of iPhones to India because of Covid-related air travel restrictions.
> Restrictions on buying of cars to be eased, with reduction in some taxes by 60 billion yuan, and proposals to help city governments meet or improve basic housing needs and conditions.
> Construction of infrastructure like irrigation and transportation facilities, and renovation of residential areas, with guides to banks for long-term loans.
> A pledge to start a new round of rural road construction projects and promise to support the issuance of 300 billion yuan worth of railway construction bonds.
> Promise to accelerate procedures for coal mine operations, thus ensuring supply, and to fine-tune policies for approving coal mines’ increased capacity
> Plan to start constructing a batch of new hydro power and coal-fired power projects
With input from Bloomberg, Reuters