MNI UPDATE1: Greater Tax Cuts Expected In 2019: China Advisor

--Can't Pursue Tax Cuts, Increased Spending, At Same Time: Liu Shangxi

     BEIJING (MNI) - China is expected to unveil a package of tax cuts next

year, larger in scale than the CNY1.3 trillion seen in 2018, to boost the

economy, a top policy advisor at the Ministry of Finance told MNI in an

exclusive interview on Tuesday. 

     At the same time, fiscal spending will be limited as the tax reductions are

implemented, Liu Shangxi, the director of the Research Institute for Fiscal

Science under the Ministry of Finance, said in Beijing before a ceremony

commemorating the 40th anniversary of China's reform and opening up policy.

     The tax cuts will be "at least bigger than this year's," Liu said. However,

he was quick to note it wouldn't be possible to boost spending and cut taxes at

the same time, saying "You cannot do two at the same time". 

     Liu spoke after state media reported a meeting of the politburo of the

ruling Communist Party of China held last week, which called for increased

market confidence, helping boost domestic consumption, and reduction of of

burdens on business.

     --OPINION DIVIDED

     While commentators agree more stimulus is needed, some have argued for more

fiscal-led investments, such as public infrastructure projects. Liu's view

reflected opinions that such measures are less likely, and that the government

may still be conservative with the overall budget deficit. 

     "Promoting the formation of a strong domestic market" is an absolute option

given the uncertain external demand, Ming Ming, chief analyst at CITIC

Securities, wrote in a commentary. 

     "Reducing fees, cutting taxes, and letting the deficit increase are all

possible policy options," Ming said.  

     The government isn't expected to finalize its policies until early next

year, according to Liu. However, the message from the politburo's meeting

indicated that policymakers' optimism on the economy hasn't picked up, so the

current combination of policies is likely to continue, said Ming. 

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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