China VAT cut to 13% on tariffs concerns

China is to cut its standard VAT rate from 16%  to 13% in 2019 to help its manufacturers struggling with US tariffs, slowing global demand and a domestic debt overhang. The VAT rate has already been cut from 17% to 16% in May 2018. This follows a wholesale revamp of the indirect tax regime between 2012 and 2015 to help encourage more internal consumption and pivot away from an export-led economy.

There may also be reductions to the construction and transportation VAT rate of 10% to 9%, respectively. These measure will leave three rates in place: 13%; 9%; and 6%. It is likely that this will be reduced to two rates in the next year.

The VAT registration threshold will also be arised to RMB100,000 per month.

Combined, the reduction would give a Yuan 2 trillion stimulus.