Announcements during the Lianghui (“Two Sessions”) meetings in Beijing, highlight that government policy support will be expanded in areas such as more special treasury bonds, local government bonds and credit growth. In addition, the Government has created room for an expanded fiscal deficit and has dropped its annual GDP growth target.
Budget deficit target: 3.6% of GDP (deficit was 2.8% in 2019)
Special Treasury Bonds: RMB1 trillion (NZ$230 billion)
Local Government Bonds: RMB3.75 trillion (NZ$890 billion, up from RMB2.15 trillion in 2019)
The government is also looking at up to RMB500 billion (NZ$120 billion) of tax and fee cuts for businesses. These would go beyond the measures taken to date in terms of tax waivers and relaxations in social security contribution obligations, for example.
Banks are being encouraged to increase lending to small businesses, implement loan renewals without the need to make repayments of principal, or even defer interest payments on loans to these businesses until Q1 2021. In early June, the People’s Bank of China and Ministry of Finance announced a RMBv40 billion (almost NZ$10 billion) scheme to compensate banks for extending the maturity of loans to borrowers that are struggling.
Government infrastructure expenditure is most likely to focus on previously identified areas such as 5G and AI, public health, logistics and also agriculture and forestry.
Overall, these measures reflect a strong focus from the Chinese Government on employment, boosting consumption and helping businesses to remain afloat, whilst not extending to massive stimulatory measures.
We recommend that you keep close to your local partners to fully understand the range of policies that could impact your business in China. A comprehensive list of policies issued by China's central and local governments can be found here: