More targeted support for small firms

Although liquidity operations by the PBOC have received the most attention this week, further measures to support small firms that were announced by the State Council on Wednesday are arguably more important given that these firms are the primary drivers of employment and innovation across the economy. The measures include tax waivers and moves to encourage banks to direct more credit to small firms. When a similar step was taken on taxes last year, the Finance Ministry estimated that it would reduce firms’ annual tax bill by RMB300bn, roughly 0.5% of GDP.