Tax cuts signal beginning of stable, quality GDP growth

In 2018, China’s GDP grew 6.6 percent and the size of its economy exceeded 90 trillion yuan ($13.41 trillion). But despite that, the Chinese economy faces downturn pressure because of external and internal factors, especially the drastic changes and rising uncertainties in the world.

That’s why this year’s Government Work Report’s focus is on maintaining economic operations within reasonable range and stabilizing economic growth. And for stabilizing growth, the government has to improve the proactive fiscal policy in order to enhance the counter-cyclical adjustment function of macro policy.

The Government Work Report says largerscale tax cuts will be implemented this year to primarily reduce the tax burdens on the manufacturing sector and micro and small enterprises. The government has already reduced taxes and fees on a large scale, including lowering the value-added tax (VAT) rate and offering favorable tax rates to micro and small enterprises and innovation-oriented companies. In fact, the tax and fee cuts last year added up to almost 1.3 trillion yuan.

This year, the government will introduce general-benefit as well as structural tax cuts, and advance the VAT reform by lowering the taxation rate for major industries. For instance, it will cut the taxation rate in manufacturing and other industries from 16 to 13 percent, and that in the transportation, construction and other industries from 10 to 9 percent to substantially reduce the tax burdens on the main industries, which will help boost the real economy.