Six key takeaways from China's annual policy blueprint

'Chinese Premier Li Keqiang delivered his 2019 government work report on Tuesday morning to the National People’s Congress in Beijing, but what does it mean?' asks the South China Morning Post

Here are my favorite three - 1 ,2, & 5 from SCMP's 'Six key takeaways from China's annual policy blueprint':

'1. Uncertain outlook'

• 'The government is foreseeing “graver and more complex” risks and challenges of a “both predictable and unpredictable” nature, and China must be “prepared to fight tough battles” this year.'
• 'As such, the government has set the economic growth target in a range of 6.0 to 6.5 per cent, which offers Beijing the necessary leeway to cope with those uncertainties.'

2. Tax cut

• The government announced a 3 percentage points cut in value-added tax rate (VAT) for manufacturers to 13 per cent, a significant tax cut.
• The VAT tax cut is part of a broader efforts by Beijing to help its domestic businesses, especially the manufacturing sector, that is vital for employment and social stability.

In 'China’s Tax Cuts Just Won’t Cut It: The manufacturing sector needs something better,' Bloomberg's Anjani Trivedi points out:

• 'Generous as that is, the tax cuts don’t solve the single biggest problem crimping China’s companies: longer working capital cycles.'
• 'An ongoing liquidity squeeze continues to deprive private and, increasingly, state-backed companies of credit, which is affecting their everyday operations and ability to service debt.
• 'Capital structures have weakened; short-term borrowings are becoming a larger part of firms’ total debt; receivables are ballooning, as are the number of days inventories are held.
• 'Large swathes of the manufacturing sector are paralyzed.
• 'The manufacturing sector, mired in a crisis of confidence, needs more than this tax cut.
• 'These companies — mostly private — have long borne a disproportionate burden of taxes, contributing a third of the government’s revenue.'

5. No ‘Made in China 2025’

• 'The phrase “Made in China 2025”, a Beijing strategy that invites suspicion from the US and Europe, did not appear in the 2019 government work report, but Beijing’s ambitions for upgrading its manufacturing industry remains.'

According to 'Beijing Drops Contentious'Made in China 2025' Slogan, but Policy Remains,' WSJ:

• '“Made in China 2025,” a government-led industrial program at the center of the contentious U.S.-China trade dispute, is officially gone—but in name only.
• 'During a nearly 100-minute speech to China’s legislature Tuesday, Premier Li Keqiang dropped any reference to the plan that the Trump administration has criticized as a subsidy-stuffed program to make China a global technology leader at the expense of the U.S. The policy had been a highlight of Mr. Li’s State-of-the-Nation-like address for three years running.
• 'Instead, Mr. Li said the government would promote advanced manufacturing. He ticked off a list of emerging industries to nurture—next-generation information technology, high-end equipment, biomedicine and new-energy automobiles—that were also in “Made in China 2025” and with a similar goal: “Buy China.”'

'Two Sessions' I

More articles from this issue

1. Facing slowing economic growth, China’s premier promises relief for business

2. Six key takeaways from China's annual policy blueprint

3. China’s Stimulus Muddle Deepens

4. China’s ‘two sessions’: an economic watershed or more of the same?

5. Xi Jinping Works to Stifle Dissent Amid Concerns About China’s Economy

6. FINTECH: Two Sessions Sends Strong Signals on Support for Chinese Fintech Development

7. How tea is served in the Great Hall of the People in China

8. 'Two Sessions': A rap song extolling China's annual political meeting

March 9, 2019