(Bloomberg) – China has rolled out an extensive package of measures to support businesses and boost demand as it seeks to offset the damage caused by Covid lockdowns on the world’s second-largest economy.

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The measures include 140 billion yuan ($21 billion) in additional tax rebates and 300 billion yuan in railway construction bonds, Xinhua news agency reported, citing a decision of a meeting of the Chinese State Council, the cabinet chaired by Premier Li Keqiang.

The additional tax cuts account for about 0.1% of China’s gross domestic product last year and push the government’s planned total tax cut this year to 2.64 trillion yuan, slightly more than the relief offered by Beijing in 2020 when China was first hit by the pandemic. .

Economists have been cautious about whether the measures would provide a significant boost to growth as China’s strict Covid-Zero policy causes a major disruption to business activity. Many economists expect the government to miss its annual GDP growth target of around 5.5% this year, with UBS Group AG the latest to lower its projection to just 3% for this year.

“We believe these measures will help and mitigate the severity of slowing or even contracting growth, but we remain cautious about the growth outlook for this year,” economists at Nomura Holdings Ltd wrote. directed by Lu Ting in a note.

The State Council said the policies are aimed at “stabilizing” the economy. He also said China will improve policies to help supply chains work, ensure smooth domestic cargo transportation and increase the number of domestic and international flights.

Beijing will also extend an existing delay on corporate social insurance contributions until the end of the year and expand the measure to more sectors, the report said, with the measure set to amount to 320 billion yuan. The meeting also indicated that a loan quota for small and medium enterprises would be doubled.

Regarding the slump in China’s property market, the meeting said it would be up to cities to set their own support measures. The country will also launch a series of infrastructure projects in areas such as water, renovation of old housing, energy security and underground pipelines, the meeting said.

Beijing has widened the scope of tax relief policies in recent weeks, but has not revised its fiscal targets for the year, which were set in early March before the omicron variant led to a strict lockdown of Shanghai and the strict restrictions in other major urban centres. At that time, the government announced that it would provide tax relief worth about 2.5 trillion yuan this year, including 1.5 trillion yuan in rebates.

The latest report did not say how the additional tax cuts will be financed, or whether they will require a revision to Beijing’s official deficit target for the year.

Bloomberg Economics last week cut its China growth forecast to 2% due to the effects of the lockdown, saying the US economy could grow faster than China’s for the first time since 1976.

China’s financial support for lockdown-stricken areas has mostly gone to businesses rather than households, leading leading economists to ask consumers for cash donations.

(Updates with construction bonds in the second paragraph. A previous version of the story corrected the tax savings value.)

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