China is also planning to increase its military budget by 7.5% to 1.2 trillion yuan.
Although that’s down from last year’s 8.1% rise, it shows Beijing won’t allow its slowing economy to undermine its defence capabilities, such as stealth fighters, aircraft carriers and anti-satellite missiles.
Premier Li Keqiang told parliament.
“We will implement the military strategy for the new era, strengthen military training under combat conditions, and firmly protect China’s sovereignty, security and development interests.”
China’s tax cuts have been well-received by traders in Shanghai.
The Shanghai composite has jumped almost 0.9%, to a new nine-month closing high.
Other Asian markets fell, though, following a sell-off on Wall Street yesterday. Japan’s Topix lost 0.5%, while South Korea’s Kospi dropped by 0.7%.
Introduction: China cuts growth target, and announces tax cuts
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s official, China’s economy is slowing — forcing its government to boost borrowing and cut taxes to ward off a hard landing.
Beijing policymakers have cut their growth target for 2019 to 6% today, from between 6 and 6.5%. That would be the weakest performance in nearly three decades, down from 6.6% last year.
Announcing the move, Premier Li Keqiang told the National People’s Congress that China faces “severe challenges”, from trade wars with America to domestic weakness.
In a gloomy statement, Li declared:
“We will face a graver and more complicated environment as well as risks and challenges … We must be fully prepared for a tough struggle.”
“Downward pressure on the Chinese economy continues to increase, growth in consumption is slowing, and growth in effective investment lacks momentum. The real economy faces many difficulties.”
Faced with this slowdown, Beijing will unleash a classic stimulus package of tax cuts and infrastructure spending.
Li said China’s fiscal policy would become “more forceful”, cutting taxes and fees paid by companies by nearly 2 trillion yuan (£227bn).
Value-added tax is also being slashed, down from 10% to 9% for transportation and construction companies, and down from 16% to 13% for manufacturers.
The lower tax revenue and higher government spending push China’s budget deficit target for this year up to 2.8% of GDP from last year’s 2.6%.
Also coming up today
We’ll find out what the Bank of England is most worried about, when the minutes of its Financial Policy Committee’s last meeting is released. Expect Brexit, trade wars and the global slowdown to features heavily.
It’s also Services PMI day, when we learn how the world’s services sector companies are faring.
- 9am GMT: Eurozone services PMI for Febuary
- 9.30am GMT: Bank of England’s Financial Policy Committee minutes released
- 9.30am GMT: UK services PMI for February
- 3pm GMT: US services PMI for February
- 3.35pm GMT: BoE governor Mark Carney testifies at the House of Lords