China cuts VAT and social insurance fees to boost economy
China will cut value-added tax rates from 1 April and also lower social insurance fees from 1 May, Premier Li Keqiang announced at the weekend. Tax and fee cuts will be nearly two trillion Yuan (US$297.5bn) this year, a key measure to cope with the current economic downward pressure, Li said at a news conference concluding the annual two sessions.
The VAT rates for manufacturing companies will be cut to 13% from 16%, and that for the transport and construction sectors will be reduced to 9% from 10%. For the social insurance fees, the premium rate will be down from 20% to 16%, stated the Premier.
China will also inclusively reduce taxes for the medium and small-sized enterprises, ensuring that taxes across industries are lowered, stressed Li.
He further added that the tax and fee cut will result in a decline of the government's revenue, but the increase in fiscal spending will be in line with the economic growth this year, especially to ensure spending on key areas such as people's livelihoods.
The government simultaneously tightened general budget spending, and urged some financial institutions and state-owned enterprises to contribute more of their profits to the national treasury, said Li.
In an immediate reaction, polyester markets turned enthusiastic and many expect the peak season will be more growth oriented.
Meanwhile, the progress of trade talks between the US and China was reported to have been good until now – which has boosted cotton futures this week.
