Boosting domestic demand can help economy: premier & State Council 'OKs￥150 billion tax cut'

Boosting domestic demand can help economy: premier

CHINA can overcome the tightening in economic conditions by boosting domestic demand, Chinese Premier Wen Jiabao said Thursday.
"We can overcome the current difficulties through stimulating domestic demand," said Wen after meeting German Chancellor Angela Merkel.
"We want to use the chances (we have) through an intense cooperation," Merkel said.
On Thursday, China and Singapore signed a free trade pact covering goods, services and labor that China's Commerce Ministry said will help the two countries cushion the impact of the global financial crisis.
The deal, agreed to last month after two years of negotiations, was signed during Singaporean Prime Minister Lee Hsien Loong's visit to Beijing for the Asia Europe Meeting (ASEM) Summit.
China agreed to eliminate tariffs for 97.1 percent of goods from Singapore starting in 2012, while Singapore will scrap taxes on all goods imported from China from next year, the ministry said.
The new agreement allows China to open wholly owned hospitals as well as schools and training centers teaching Chinese language and medicine in Singapore.
Investors from Singapore can own up to 70 percent of individual hospitals in China, the ministry added.
"The Chinese Government has already made, and will continue to make, policies to handle the impact of external events in an effort to maintain stable economic growth, financial stability and capital market stability," Vice Premier Wang Qishan said Wednesday.
Wang said China would work with the Association of Southeast Asian countries to promote regional economic development and financial stability.

State Council 'OKs￥150 billion tax cut'

THE State Council has approved a Finance Ministry proposal to reform the value-added tax (VAT) system, which could result in a fall in a tax cut of 150-200 billion yuan (US$21-29 billion).
The reforms involve shifting to a consumption-based VAT from the current production-based system, effectively lowering taxation at the corporate level, a report in the Guangzhou-based Information Daily said Thursday, quoting sources.
The VAT reform, which would allow firms to write off core investment expenses from their tax bills, had already been tried on a trial basis in a handful of provinces.
The new VAT system would be implemented Jan. 1, 2009, the report said.
China's economy grew by 9 percent in the third quarter, slowing from 10.6 percent and 10.1 percent in the first and second quarters.
Some economists have suggested the government lower taxes to deliver a fiscal boost.
China's benchmark stock index, the CSI 300, rose for the first time in three days Thursday, led by developers after the government announced measures to bolster the property market.
Shenzhen-based China Vanke Co., the country's largest publicly traded developer, gained 4.4 percent and Poly Real Estate Group Co., the second-biggest, climbed 6.4 percent. China Eastern Airlines Corp., the nation's No. 3 carrier by fleet size, advanced just over 6 percent after oil fell Thursday to the lowest since June 2007.
The CSI 300 Index, which tracks yuan-denominated stocks traded in Shanghai and Shenzhen, added 1.46, or 0.1 percent, in the last 15 minutes of trading to 1,834.78 at the close.

The government's real estate stimulus package "may help improve sentiment in the short term but is unlikely to lift the property market," said Liu Bin, a real estate analyst at CSC Securities HK Ltd. "Prices are still too high."

The CSI 300 has slumped 66 percent this year, making it Asia's worst-performing benchmark index. Stocks have fallen amid concern that demand for Chinese products will decline as the global credit crisis causes financial institutions to collapse and drags the world's largest economies into recession.