China reportedly plans on cutting VAT rate by 3% for manufacturers

Map of ChinaChina plans to reduce the value-added tax (VAT) rate by 3% for manufacturers as part of an effort to help corporations and boost its slowing economy, according to recent Bloomberg report citing people familiar with the matter.

An unnamed source said that a reduction in the highest of the nation’s three VAT brackets could be announced as soon as this week.

Premier Li Keqiang is set to deliver his annual report on economic policy on Tuesday. The report will outline economic targets and policy direction.

The move could provide a boost to China’s slowing economy of 600 billion yuan ($90 billion), or 0.6% of GDP, according to estimates by Morgan Stanley.

The news comes as the US and China are reportedly nearing a trade deal.

According to the WSJ, the two parties are in the “final stage” of completing a trade deal, with China offering to lower tariffs and restrictions on US farm, chemical, auto and other products and the US considering lowering or removing sanctions levied against Chinese products since last year.

Chris Beauchamp, chief market analyst at IG Group, was quoted by Yahoo Finance as saying:

“The carrot of a trade deal is being dangled in front of investors once again.

“Hope that Trump and Xi will sit down later in the month to hammer out a resolution have buoyed equities, but given the outcome of last week’s U.S.-NK chit-chat perhaps a more sanguine approach would make sense.”

 

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