China to step up targeted investment to boost recovery, no flood-like stimulus, to extend NEV purchase tax exemption, said State Council

 

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China should consolidate economic recovery, stabilize employment and prices and maintain economic operations within a reasonable range, the State Council said at a meeting chaired by Premier Li Keqiang on Friday, according to the state broadcaster CCTV.

The economy is in the “critical window” of stabilisation and recovery, and the third quarter is “vital”, it said.

To spur demand, the country will make effective investment play a key role in boosting economic recovery, it said, noting that investment should be targeted and timely but there won’t be flood-like stimulus.

Local governments should speed up the use of the funding from special-purpose bonds for infrastructure investment, it said.

The cabinet also said that China will continue to promote consumption to make it the major driving force of the economic growth.

The country will extend an exemption of purchase taxes on new energy vehicles to boost car sales, the cabinet said, without offering more details.

The currently policy to exempt the 10% purchase tax for new energy vehicle will expire at the end of 2022 and the industry ministry has said it’s studying extension of the exemption.

After the State Council’s latest comment, Cui Dongshu, secretary-general of the China Passenger Car Association, said at an interview that the tax exemptions will be extended by one year, with any additional adjustments dependent on the prevailing conditions.

Regions with car purchase restrictions in place should increase the quota for car purchases and relax the restrictions on qualification for auto purchases and meanwhile, China will break the impediment to the circulations of used cars, the cabinet said.

The country will support “rigid housing demand and upgrading housing demand” and local governments are encouraged to provide appropriate subsidies to purchases of green and smart home appliances, said the State Council.

China will actively develop digital consumption and firmly implement the measures to support industries in difficulties such as catering and retail industries, extend value-added tax cut for the services sector, in a move to help market entities through tough times and support consumption, it said.

The world’s second-largest economy narrowly avoided contraction in the second quarter due to widespread pandemic lockdowns. Analysts said Beijing’s full-year growth target of around 5.5% had been looking increasingly unattainable under Beijing’s strict zero-COVID policy.