China EconTalk: JD Digits' Shen expects 1.5 tln yuan in 2019 tax cuts

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03:34

China saw 1.3 trillion yuan (about 192 billion U.S. dollars) in tax cuts in 2018 and Shen Jianguang, chief economist at JD Digits, predicts more concessions this year of at least 1.5 trillion yuan.

At the start of the year, the authorities implemented a new round of tax cuts, with an aim of saving small and medium-sized enterprises (SMEs) 600 billion yuan (nearly 89 billion U.S. dollars) over three years.

Shen sees those changes as just the beginning.

“This is the first time that the government is targeting specifically SMEs,” he said. “I believe there are more radical tax cuts for all of the economy, for all enterprises and also for households. I think probably we will be 1.5 trillion yuan (about 221 billion U.S. dollars) in tax cuts in total for this year.

Shen Jianguang, chief economist at JD Digits. /CGTN Photo

“I believe that there is more important tax revenue like value-added tax will be also cut. That is the most important tax source for the Chinese government. And also the social security compensation will also be cut. I estimate that the total tax cut will be even larger than last year.”

As to monetary policy, the second half of the 100 basis point triple R cut announced in early January took effect Friday. This is a broad-based triple R reduction, not targeted and only three months removed from the previous triple R cut.

“Triple R cut as well as more injection in the liquidity to the market by market operation, we are seeing quite many measures announced by PBOC (central bank) to ease this credit condition in the economy,” he explained.

Going forward, he sees “making money available for the bank to lend to enterprises” as the number one objective. “And there is no worry for inflation for this year. As the economy is slowing, I think the main purpose is to stabilize the economy to boost the investment by companies,” he said.