China will adopt an "active" fiscal policy and "moderately easy" monetary policy to support fast but steady economic growth by expanding domestic demand, an executive meeting of the State Council (cabinet) said on Sunday.
The economy grew by 9 percent in the third quarter, the slowest in five years, as the global financial crisis sapped demand for Chinese goods, and domestic industrial production waned in response to weak demand and rising raw material costs.
In response to changing conditions, the government shifted efforts from fighting overheating to seeking sound and fast development. Following are moves taken over approximately the past 90 days to boost the economy:
-- On Aug. 1, China raised tax rebates for certain textile and garment exports to help producers cope with the paper-thin profit margins squeezed by the yuan's appreciation, higher costs and rising raw material prices.
Export tax rebates for some textile and garment items, including silk, wool yarn, chemical fibers and cotton products, were increased by 2 percentage points to 13 percent.
-- On Aug. 5, the People's Bank of China (PBOC), the central bank, agreed to raise the 2008 credit quota by 5 percent for national commercial banks and 10 percent for local commercial banks, aiming to ease the financing difficulties of small and medium-size enterprises.
There were minor adjustments made to reflect differing conditions among local banks.
-- The PBOC cut interest rates for one-year loans by 0.27 percentage points to 7.2 percent as of Sept. 16. It also cut the reserve requirement ratio for all but the country's five largest banks by 1 percentage point to 16.5 percent from Sept. 25.
The reserve requirement ratio was reduced by 2 percentage points for local financing institutions in areas badly hit by the May 12 earthquake.
-- On Sept. 19, the country removed the stamp tax on stock purchases, but the tax on sales remained at 0.1 percent. It was the first such move since 1991 and followed a two-thirds fall in the key stock index since October 2007.
-- Also that day, the State-owned Assets Supervision and Administration Commission said the government would support centrally-administered State Owned Enterprises in buying more stocks of their listed subsidiaries.
Central Huijin Investment Co., Ltd., a government investment arm, said it planned to buy shares of three major Chinese lenders on the secondary market to support their share prices.
-- On Oct. 5, the China Securities Regulatory Commission announced it would launch margin financing and securities lending on a trial basis. Eleven securities companies took part in a trial run on Oct. 25.
Non-financial enterprises were allowed to float mid-term bonds as of Oct. 6, which would help ease financing difficulties.
-- The PBOC cut both interest rates and the reserve-requirement ratio. Deposit and lending rates was cut 0.27 percentage points effective Oct. 8, and the reserve-requirement ratio was cut by 0.5 percentage points from Oct. 15. This was the first time in nine years that the country reduced deposit rates at all financial institutions.
-- On Oct. 17, Premier Wen Jiabao announced at an executive meeting of the State Council that the government would adopt comprehensive measures and allocate central funds in the fourth quarter to boost domestic demand, improve living standards and stimulate economic development.
-- The PBOC announced tax exemptions and downpayment cuts as of Oct. 27 to boost the falling real estate sector. The minimum downpayment for a first-time buyer of a residence smaller than 90 square meters was reduced to 20 percent from 30 percent.
Interest rates on mortgages for first-time buyers were cut 0.27 percentage point. The floor for interest rates was lowered to 70 percent of the central bank's benchmark rate.
-- The PBOC cut benchmark interest rates by 0.27 percentage point as of Oct. 30, the third such move in six weeks.
The benchmark one-year deposit rate dropped to 3.60 percent from 3.87 percent, while the benchmark one-year lending rate fell from 6.93 percent to 6.66 percent.
-- China raised tax rebates for 3,486 export items as of Nov. 1. The adjustment covered such labor-intensive industries as textiles, toys, garments, and high-tech products, accounting for 25.8 percent of products covered by customs tariffs. Rebate rates run roughly from 9 percent to 14 percent.
(Xinhua News Agency November 10, 2008)