China Central Bank Official: Tax Cuts More Effective Than Rate Cuts, According to Media Report by Reuters

A Chinese central bank official has stated that tax reductions could be a more effective means to stimulate the economy than cuts to interest rates, as businesses remain hesitant to invest. Sheng Songcheng, who heads the Survey and Statistics Department at the People’s Bank of China, noted that enterprises find themselves in a liquidity trap, suggesting that regulators should prioritize adjustments to fiscal policy.

Sheng emphasized that the primary reason for the disparity between the increase in the money supply and the economic growth lies in the reluctance of businesses to invest. However, the statement did not specify which taxes might be reduced.

China’s economy recorded a growth rate of 6.7 percent in the second quarter, marginally exceeding expectations. Yet, investment growth from private firms reached a record low during the first half of the year.