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China 'to lower VAT for manufacturing sector'

Beijing

CHINA is to cut the value-added tax (VAT) rate covering the manufacturing sector by three percentage points to support the slowing economy, said a source close to the matter.

The reduction in the highest of the nation's three VAT brackets could be announced as soon as this week, when political leaders gather in Beijing for the annual National People's Congress, the source said, requesting anonymity.

Premier Li Keqiang will deliver his report on economic policy, which sets out targets for gross domestic product expansion and objectives for fiscal and monetary policy. A three percentage-point cut to VAT could deliver a boost worth up to 600 billion yuan (S$121.9 billion) or 0.6 per cent of GDP, Morgan Stanley estimates.

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The move helps corporate profits just when the economy is under pressure from the US trade standoff and the impact of a domestic debt cleanup.

The tax cut is also part of broader, more "proactive" fiscal support. The budget deficit target is said to be widened to 2.8 per cent of GDP from 2.6 per cent in 2018; the quota for special bonds is said to be set to 2.15 trillion yuan, a significant rise from 1.35 trillion yuan in 2018. BLOOMBERG