Factory Slow Down: Update

Published on Author kavanaght16

In my post yesterday, I wrote on the impending economic stimulus in China. I suggested that time would only tell the success and manner of the stimulus. It turns out, that time is today. Earlier today, China announced its three-part solution to its slowing growth rate. First, China is cutting taxes on small firms. The tax cut will allow small business to halve the income tax they are currently paying, which China feels will increase spending as well as encourage investment in small business. This tax cut will remain through at least the end of 2016. Second, China has announced that it will speed up the construction of the nations new railway lines. To finance the railway, China will issue 150 billion yuan worth of new bonds, as well as allow firms to take out bank loans. The project will create 6,600 kilometers of new track, which should increase the flow of goods throughout China. Finally, China intends to create a $32.2 billion dollar annual fund open to private investors in order to encourage investment.


Further Reading:http://www.reuters.com/article/2014/04/02/us-china-economy-tax-idUSBREA3114L20140402

One Response to Factory Slow Down: Update

  1. What concerns me is who was bearing the weight of the tax beforehand. If the tax was placed on the consumer, purchasing may remain the same or decrease. If the tax was a burden on the producer, will they reduce their prices or collaborate to maintain prices and increase prices? It will be interesting to see what happens.