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Project Approval Acceleration Adds Fiscal
Stimulus - On September 5,
the NDRC announced that it has approved the construction of 25 urban rail
transit projects with total investments worth more than CNY 800 billion. In the
days following the announcement, additional projects were approved adding
stimulus at a time of slower growth. Reactions to the approvals were mixed.
Some analysts point to the risk of overheating, some say there will be no
notable effect due to the relative restrictive banking lending currently, and
others say that the projects are part of the 12th FYP and have been waiting for
approval for some time.
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China May Introduce New Foreign Trade
Stimulus Measures - China’s
weak export growth has been weighing on the Ministry of Commerce and the
regulator is now actively studying methods to stabilize export growth.
Currently there are rumors that a new round of foreign trade stimulus policies
will be rolled out, which will include quality inspection, customs clearance,
credit, and insurance and increase in tax rebates. The new stimulus measures
are expected to be launched later this month.
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VAT Reform Continues Moving Ahead - The reforms which will replace business tax
with VAT are moving ahead. Most recently, on September 6, the Beijing Municipal
Office of the State Administration of Taxation released details of VAT
regulation reform, clearly outlining relevant procedures as well as the
application materials taxpayers need to submit.
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Industrial value added growth continued its downward trajectory in
August, with light industry IVA growth declining 1.5 ppt on July. Outlook
indices looked equally bleak in August with the NBS and HSBC PMI falling further
into contractionary territory.
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As predicted by the CAI, FAI growth fell to 20.2% in August.
Private FAI growth suffered the largest setbacks. As one of the few bright
spots in the downbeat August data, growth of investment in real estate development
increased slightly and floor space growth stopped declining reflecting some
faith in the sector.
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Driven by soaring global food
prices, CPI-measured inflation rose 2.0% year-on-year in August, up from 1.7% in
July.
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The PBOC continues its
cautionary monetary policy stance and have kept the RRR ratio unchanged for
three months. Total social financing in August increased on the previous month;
a nascent sign that policy efforts to stimulate the economy are being stepped
up.
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China’s trade surplus increased
slightly in August as weak domestic demand drove down import growth.
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Net change in forex purchase
position was a negative CNY 3.82 billion in July as expectations of CNY
appreciation are fading.
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