August 30, 2018 / 11:24 AM / 20 days ago

China announces tax cuts in move to support economy

BEIJING (Reuters) - China’s cabinet on Thursday announced new measures to cut costs for companies as policymakers look to support growth amid an escalating trade war with the United States that threatens exporters.

The State Council announced tax cuts that should reduce firms’ costs by more than 45 billion yuan (5.06 billion pounds) this year, state radio reported.

Beijing is speeding up infrastructure spending and offering help to smaller companies as China’s economy cools and U.S. trade tensions intensify.

Beijing has pledged to use a more proactive fiscal policy as economic growth slows and firms struggle with tight liquidity and weak demand, due at least in part to a deleveraging campaign meant to reduce risks.

“Cutting taxes and reducing costs are a key initiatives in implementing active fiscal policy and ensuring a stable economy,” said the cabinet.

At the meeting chaired by Premier Li Keqiang, the cabinet also decided to increase the rate of export tax rebates for some products, and increased the amount banks can lend to small firms and not have to pay taxes on interest income.

Foreign investors also will not have to pay enterprise or value added taxes on interest income earned in the domestic bond market for three years, the cabinet decided.

Reporting by Cheng Fang and Elias Glenn; Editing by Simon Cameron-Moore

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