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China's government plans to adopt both fiscal and financial measures to underpin domestic demand as worsening trade relations with its major trading partner, the US, limited the impetus to growth from exports.
The State Council meeting, chaired by Premier Li Keqiang late Monday, decided to take more "proactive" fiscal steps to help the economy grow in a reasonable pace amid external uncertainties, but to avoid a strong stimulus.
Proactive fiscal measures will cover deeper tax cuts, additional deductions to companies on research and development expenditure and issuing special bonds to local government to fund infrastructure projects.
The policy is expected to cost CNY 65 billion this year. Li urged solid implementation of lending to small and micro businesses.
The council also vowed to maintain appropriate credit growth under prudent monetary policy. Li agreed to improve the transmission mechanism of monetary policy.
The announcement came hours after the central bank injected a record CNY 502 billion into the banking system via medium-term lending facility.
Recently, the People's Bank of China stepped up liquidity injection measures and lowered reserve requirement ratios for three times this year.
In the second quarter, China's economic growth slowed to 6.7 percent from 6.8 percent a quarter ago. This was the slowest since the third quarter of 2016.
