Beijing needs proactive stimulus policies to shield economy from worst of trade war

By Hu Weijia Source:Global Times Published: 2018/10/8 22:28:39

China is in a critical period of stabilizing its economy. One decade after the global financial crisis, the Chinese economy is again facing uncertainty and challenges under internal and external pressure. It may be that China can't overcome these difficulties by simply continuing to fine-tune its economic policy. To maintain a stable trend in economic development, strong measures must be taken to support growth.

China will adopt more proactive fiscal measures, such as tax cuts, to help businesses affected by the trade conflict with the US, Chinese Finance Minister Liu Kun has said.

Total tax cuts for 2018 are expected to exceed 1.3 trillion yuan ($189 billion). The country will also study more large-scale tax reductions, Liu said in an interview with the Xinhua News Agency.

 On Monday, Chinese mainland-listed shares closed lower with the benchmark Shanghai Composite Index falling 3.72 percent, suggesting a lack of confidence among investors.

Chinese investors faced much negative news last week. In a speech on Thursday, US Vice President Mike Pence launched a broad attack against Beijing. His words were a strong signal that, in the short run, the tension between China and the US over economic issues is unlikely to ease. The external environment is becoming unfriendly to the further development of an export-oriented economy.

 Apart from steps China has already announced to reduce business costs, the country needs to draw up more policies to reduce taxes and support the real economy. Liu's comments about large-scale tax cuts are timely and necessary to ease investors' concerns. The questions are: How soon can those measures be taken and how proactive will the policies be?

In 2008, the Chinese government announced a 4 trillion yuan stimulus package to fight the impact of the global financial crisis. Now, the Chinese economy is under even tougher pressure amid escalating trade friction. Beijing must draw up strong stimulus policies to inject new momentum into the real economy.

The author is a reporter with the Global Times.


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