China’s recent measures to spur growth

Reuters reports about China's recent measures to spur growth.

(emphasis mine)

China's recent measures to spur growth
Mon Dec 29, 2008 12:59pm IST

BEIJING, Dec 29 (Reuters) - China raised tax rebates for some exporters of high-tech and machinery products on Monday, in its latest move to cushion the economy from the global financial crisis.

Following are some of the recent steps China has taken to prop up economic growth, which has been slowing due to weakening external demand and the belated impact of restrictive domestic policies, including tighter credit.


DEC 22 -- The People's Bank of China (PBOC), the central bank, cuts benchmark one-year lending and deposit rates by 27 basis points. It also cut banks' required reserves by 0.5 percentage points.

NOV 26 -- The central bank cuts benchmark one-year lending and deposit rates by 108 basis points. It also cuts big banks' required reserves by 1 percentage point and that for small- and medium-sized lenders by 2 percentage points, from Dec. 5.

NOV 6 -- Bill rates tumble a day after the People's Bank of China (PBOC) scales back liquidity-draining three-month bill sales from once a week to once every two weeks. It made a similar change to the schedule for 52-week bill sales the week before.

NOV 1 -- The PBOC scraps lending quotas, Xinhua quotes spokesman Li Chao as saying.

OCT 29 -- The PBOC cuts benchmark one-year lending and deposit rates by 27 basis points.

OCT 8 -- The PBOC cuts benchmark one-year lending and deposit rates by 27 bp. It also cuts banks' required reserves by 0.5 percentage points from Oct. 15.

OCT 6 -- The PBOC reopens the medium-term note market after a four-month hiatus and lengthens maturities to seven years from five.

SEPT 15 -- The PBOC cuts the benchmark one-year lending rate by 27 bps but keeps deposit rates unchanged.

It also lowers reserve requirements by 1 percentage point for all banks except China's five biggest lenders and the Postal Savings Bank.


DEC 29 -- China raises tax rebates for exporters of 553 categories of high-tech and electronic products, including motorcycles, sewing machines and robots, effective on Jan. 1.

NOV 17 -- China raises export tax rebates for some rubber and wood products, glassware, bags, shoes, furniture, beware, stone materials and aluminium sheet and strip, effective on Dec. 1.

NOV 14 -- China scraps export taxes for some steel products, aluminium, rice, wheat, flour and fertilisers from Dec. 1.

NOV 12 -- China increases export tax refunds on 3,770 tariff lines, or 27.9 percent of all exports, from December.

OCT 21 -- China raises value added tax rebates on exports making up 25.8 percent of its tariff lines as from Nov. 1.

Refunds rise to 14 percent for some textile, garment and toy exporters. Manufacturers of ceramics, plastic and furniture products are among other labour-intensive industries to benefit.

JUL 30 -- China raises tax rebates to 13 percent for textile and garment exporters, effective on Aug. 1.


DEC 17 -- The State Council issues a slew of new measures to help the property sector, including cutting to two years from five years the lock-up period beyond which people can resell their property without paying a business tax.

It also scraps the urban property tax for foreign firms and individuals and allows people to buy second homes on the same preferential terms normally reserved for buying first homes.

NOV 12 -- China says it will spend 900 billion yuan over three years to build affordable housing.

OCT 22 -- The deed tax payable by first-time buyers of homes smaller than 90 sq m is cut to 1 percent. Stamp tax is scrapped for buyers and sellers, and the latter no longer have to pay VAT.

MAY-OCT -- More than a dozen cities, including Shanghai, Nanjing and Hangzhou, announce various measures such as cash subsidies and tax cuts to encourage home purchases.


NOV 9 -- China unveils a 4 trillion yuan (586 billion) stimulus package to boost domestic demand through 2010.

The central government will finance 1.18 trillion of the total and catalyse the rest from local governments and state-owned banks and enterprises. Economists debate how much of the headline figure represents genuinely new spending.

NOV 5 -- The China Business News says China plans to invest 5 trillion yuan ($732 billion) on roads, waterways and ports in the next three to five years, over 2 trillion yuan ($293 billion) more than the transport ministry's initial plan.

OCT 25 -- Media report that China has approved a total of 2 trillion yuan for railway investment since the start of 2004, over 1.2 trillion yuan of which has already been earmarked.

SEPT 22 -- China announces a tax break for public infrastructure projects approved since the beginning of 2008. In the fourth to sixth years after they start to generate revenues, they will get a 50 percent reduction on corporate income tax.


OCT 9 -- China abolishes the 5 percent withholding tax on interest income.

SEPT 18 -- China scraps the 0.1 percent stamp tax on purchases of equities and instructs Central Huijin, a government investment arm, to buy shares of listed Chinese firms.

The government also encourages state-owned firms to buy back shares in their listed units.


OCT 20 -- China raises minimum grain purchase prices by as much as 15 percent, sets up a national soybean reserve and increases buying of grains, rapeseed and cotton for state reserves to help shore up farmers' incomes.

OCT 12 -- The ruling Communist party approves landmark reforms that give peasants the right to lease or transfer their land-use rights. The change is aimed at encouraging the agglomeration of small parcels, thus boosting productivity and encouraging investment. (Compiled by Langi Chiang)

AFP reports about China issues stimulus package for auto sector.

China issues stimulus package for auto sector: state media
January 14 2009

BEIJING (AFP) — China has issued a stimulus package for its auto sector, including a tax cut, the first in a series of policies to boost key industries in the midst of the global crisis, state media said Thursday.

The package from the State Council, or cabinet, includes a cut in the sales tax to five percent from 10 percent for cars with engines less than 1.6 litres, from January 20 until the end of the year, the China Daily reported.

"In order to adjust and revive the auto sector, we must implement a proactive consumption policy ... to stabilise and boost auto demand," the State Council was quoted as saying.

The government is expected to release supportive policies for eight other industries, including shipbuilding, petrochemicals and textiles, in the next few days, according to the paper.

The package promises a 10-billion-yuan (1.5-billion-dollar) subsidy over the next three years for auto makers that upgrade their technology and develop alternative-energy vehicles.

The government in particular wants to promote the mass production of electric cars in big and medium cities, according to the paper.

The package also calls for five billion yuan to be spent as subsidies for farmers who opt to replace three-wheeled vehicles or outdated trucks with new, small vehicles, the paper said.

Growth in the auto sector slowed to 6.7 percent last year, the lowest level in a decade, according to the paper.

The slowdown is having an impact on balance sheets, with combined profits of the 19 biggest auto makers falling 0.5 percent in the first 11 months of last year to 65.6 billion yuan, it said.

My reaction: That is a lot of stimulus! Points to note:

1) China is cutting back on its sterilization efforts: "the People's Bank of China (PBOC) scales back liquidity-draining three-month bill sales from once a week to once every two weeks."

2) The PBOC has scraped lending quotas.

3) China only cut tax on "cars with engines under 1.6 litres capacity". This will not help demand for American SUVs.

4) I love how China is spending billions to promote new technology vehicles while the big three are using all their government money just to survive.

I really don't see how anyone can expect deflation in China. I really don't.

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