China will not resort to ‘flood irrigation’ stimulus under downward pressure: Premier Li

Source:Global Times Published: 2019/3/15 15:53:40

Chinese Premier Li Keqiang on Friday vowed to stick to tax and fee cuts for companies to boost market vitality in the face of downward pressure on economic growth and refrain from "flood irrigation" stimulus that would leave problems later.

"The so-called 'flood irrigation' stimulus may be effective in the short-term but will bring residual effects, so it is inadvisable," Li told a press conference following the conclusion of the annual two sessions in Beijing.

Under persistent downward pressure, some had speculated that China might resort to old-fashioned growth boosting measures including monetary easing and increasing the government deficit, which often lead to excessive money supply and an unhealthy level of government debt.

"We will stick to energizing market vitality to withstand downward pressure," Li stressed, adding energized market vitality would enhance growth driving forces.

In this year's Government Work Report, China vowed to make massive cuts to taxes and fees totaling 2 trillion yuan ($297.5 billion) and improved business conditions for companies, as part of its key measures to stabilize growth.

Citing such measures to help more 100 million market entities in the country, Li said that "China would be able to keep economic operation within a reasonable range and push forward high-quality development."

To carry out measures, the Chinese government will tighten its budget to let companies benefit more.

"Tax reduction means less revenue," the Chinese Premier said, adding that some might wonder how the Chinese government would pay for expenses for measures in areas such as people's livelihood. "Our method is for the government to live on a tight [budget]."

He said that the government would cut expenditure on general public budgets as well as increase income from profits from certain financial institutions and centrally controlled state-owned enterprises. "We do this not to consume the future but rather nurture the future," Li said. 

However, the Chinese Premier also noted that China has left room for fiscal and monetary policies in the face of uncertainties this year. He said China's deficit-to-GDP, projected to grow to 2.8 percent, is still below the 3 percent warning level adopted globally and China could also adjust reserved requirement ratio - cash banks are required to have as a reserve - and interest rates and other tools.

"This is not to ease monetary policy but to ensure the real economy receives more effective support," he said. "Regardless of any new situation, we will look at both short term and long term to maintain stability in the Chinese economy."   


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