Tax breaks and a bond drive for Chinese aviation and railway firms are among a blizzard of fresh measures agreed by China's economic planners to gee up an economy stunted by a coronavirus surge.

China is the last major economy bolted to a zero-Covid strategy of mass testing and tough lockdowns to stamp out infections.

Movement curbs have hit dozens of cities in recent months -- from the manufacturing hubs of Shenzhen and Shanghai to the breadbasket of Jilin -- seizing up supply chains and crushing retail sales and industrial output to their lowest levels in around two years.

The State Council on Monday announced measures to "stabilise the country's economy and bring it back onto a normal track", according to the official Xinhua news agency.

Beijing will expand the quota of value-added tax refunds by 140 billion yuan ($21 billion), the agency said.

This takes the overall target of tax refunds, cuts and fee reductions to 2.64 trillion yuan this year, according to a readout of the State Council meeting on Xinhua.

Authorities will also double the lending quota for banks to help smaller enterprises, while allowing some borrowers to postpone their repayments, the report added.

The government will also issue 200 billion yuan in bonds to support the aviation industry, cut the purchase tax on some cars, and support the issuance of 300 billion yuan in railway construction bonds, Xinhua said.

"We believe these measures will provide some help and alleviate the severity of the growth slowdown... (but) remain cautious about growth prospects for this year," Nomura analysts said in a note on Tuesday.

The moves come as Chinese cities roll out more regular Covid testing, crowding out other fiscal spending, Nomura said.

Meanwhile, the zero-Covid strategy is likely to bog down private demand, analysts added.

Markets remained gloomy despite the pledges, with the Shanghai Composite Index down 1.2 percent on Tuesday, while the Shenzhen Composite Index slid two percent in afternoon trade.

Asian markets fall on China growth concerns
Hong Kong (AFP) May 24, 2022 - Asian stocks retreated Tuesday on concerns over the impact of China's Covid restrictions on the world's second-largest economy as investment banks slashed their forecasts.

A strong rally on Wall Street, where the Dow closed 2.0 percent higher, did not carry over to Asia, and Beijing's announcement of a fresh raft of measures to stimulate the economy did little to calm nerves.

The package announced on Monday includes more than 140 billion yuan ($21 billion) in additional tax rebates, bringing the total amount of tax relief this year to 2.64 trillion yuan, Xinhua news agency reported following a meeting of the State Council chaired by Premier Li Keqiang.

China's economy has taken a hit from Beijing's zero-Covid approach to the pandemic, which has resulted in lengthy lockdowns of major cities and mass testing of millions of people.

Prolonged virus lockdowns have constricted supply chains, dampened demand and stalled manufacturing.

Investment banks UBS Group and JPMorgan Chase cut their China economic growth forecasts due to the impact of the coronavirus strategy.

UBS on Tuesday cut its 2022 GDP growth forecast to 3.0 percent from 4.2 percent while JPMorgan on Monday trimmed its forecast to 3.7 percent from 4.3 percent, Bloomberg News reported.

"The lingering restrictions and lack of clarity on an exit strategy from the current Covid policy will likely dampen corporate and consumer confidence and hinder the release of pent-up demand," UBS economists including Tao Wang wrote in a research note, according to Bloomberg.

China has targeted full-year growth of around 5.5 percent, but data published in April showed that first-quarter growth slowed to 4.8 percent after its economy lost steam in the latter half of last year.

Concerns over the economic fallout from China's dogged pursuit of a zero-Covid approach and its knock-on impact on supply chains and the wider global economy spooked investors, with Asian markets well into the red on Tuesday.

Tokyo was off 0.5 percent while Hong Kong was down 1.5 percent after the city's leader Carrie Lam said there would likely be no relaxation of quarantine travel restrictions for the remainder of her term, which ends on June 30.

Shanghai and Seoul were both down 0.8 percent, while Taiwan, Bangkok, Sydney and Manila also retreated. Singapore was one of the few markets to post gains.

Later in the week, investors will be eyeing the minutes from the latest Federal Reserve rate-setting meeting for clues about further rate hikes aimed at reining in inflation. A raft of economic figures will also provide insights into the state of the US economy.

"If inflation remains sticky and the Fed needs to be more aggressive, assets are not cheap enough yet -- in that world, more recession risk will need to be priced through lower earnings," said Stephen Innes of SPI Asset Management.

"However, if inflation does cool down, there are many compelling opportunities, significantly if 'storm clouds' over the economy dissolve."

Oil was lower, with both contracts down 0.4 percent.

"Energy traders see choppy waters ahead for oil prices as uncertainty persists with the global economic outlook and over the EU's progress with a ban on Russian oil," said Edward Moya of OANDA

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Asian markets up after China cuts key interest rate
Hong Kong (AFP) May 20, 2022
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