More stimulus expect as China tries to boost domestic demand

Growth in China, the world’s second largest-economy, cooled to a near 30-year low of 6.1 per cent in 2019 amid a bruising trade war with the United States, and more stimulus is expected this year as the country tries to boost sluggish domestic demand.

However the China is confident of maintaining steady industrial growth this year despite big pressures on the sector, underpinned by tax cuts and broad policy support, Minister of Industry and Information Technology Wei said on Monday.

The country’s industrial output topped expectations in December by growing 6.9 per cent from a year earlier, the strongest pace in nine months, bringing full-year 2019 expansion to 5.7 per cent - within the government’s target of 5.5-6.0 per cent.

“Looking forward to 2020, industrial development faces many difficulties and risks,” Miao told a news conference. “The pressure on stabilising industrial growth is still big.”

But the government will be able to “ensure the smooth operation of the industrial economy” this year as big tax cuts and policy efforts to ease corporate funding strains have started to gain traction, he said.

Beijing will continue to implement tax and fee reduction measures this year, focusing on the manufacturing sector, Miao said without giving details. The government has said its tax and fee cuts exceeded 2 trillion yuan ($292.03 billion) in 2019.

China will increase investment in research and development and use other policy incentives to help promote innovations and upgrade the manufacturing sector, Miao said.

China welcomes foreign firms to participate in the building of its 5G networks and opposes politicising the technology issue, he said, in an apparent criticism of Washington’s moves against Huawei, the world’s largest maker of mobile networking equipment.

Washington is trying to persuade Britain not to use Huawei equipment in the upgrade of its telecoms network.

Wen Ku, spokesman and head of the information and communication department at the ministry, said China has been conducting research on 6G for two years, but to date the government “had no obvious or standout results to share with anyone.” Separately, Miao said China is also studying postponing the reduction of subsidies for new energy vehicles.

China expects vehicle sales to remain at around 25 million units in 2020, and they could be flat from last year or decline, the minister added.

The Chinese stocks rose on Monday on signs of a stabilising domestic economy and increasing expectations of government stimulus to aid growth, while Hong Kong shares dipped.

The CSI300 index rose 0.5 per cent to 4,176.50 by the end of the morning session, while the Shanghai Composite Index gained 0.4 per cent to 3,088.59.

In Hong Kong, the Hang Seng index dropped 0.4 per cent to 28,942.57, while the Hong Kong China Enterprises Index lost 0.2 per cent to 11,401.63.

China is confident of maintaining steady industrial growth this year despite big pressures facing the sector, Minister of Industry and Information Technology Miao Wei said on Monday. His remarks came after China’s industrial output topped expectations in December by growing 6.9 per cent from a year earlier, the strongest pace in nine months.

 Investors also expect more government stimulus ahead after China’s economic growth cooled to a near 30-year low of 6.1 per cent in 2019 amid a bruising trade war with the United States.

 Among shares, hotel operators and tourism firms slumped following news that an outbreak of a new coronavirus in China was spreading to other cities, raising concerns around its containment and clouding travel plans of millions of Chinese for Lunar New Year holiday.

Meanwhile the US President Donald Trump sought on Sunday to assure American farmers and ranchers hit by a protracted tariff war with China that a trade agreement he signed with Beijing will lead to major purchases of US agricultural products.

Trump’s remarks in Texas, a state he won in 2016 and will need again in November’s election, had all the hallmarks of a political stump speech, with a slam at Democrats trying to remove him through impeachment and a wish he could wear a cowboy hat in Washington.

He began his remarks to the annual American Farm Bureau Federation convention in Austin by waving a copy of a Farm Journal poll that said he had wide support among farmers and ranchers.

Reuters