It sounded unusually grisly, but China's Prime Minister Li Keqiang drove the point home when he said the government was prepared to turn the knife blade inwards and "cut its own flesh" to keep the economy going in these troubled times. At last week's annual national legislative session, he promised sharp corporate tax cuts for manufacturing, transport and other sectors amounting to almost 2 trillion yuan (S$403 billion). State-owned banks were also instructed to do more to provide smaller private enterprises with credit. These and other measures point to the daunting challenges China's economic managers face as they try to meet several goals - pushing back against the downward pressures on growth while avoiding the excesses of a massive debt-fuelled stimulus and yet keeping the official budget deficit to under 3 per cent of economic output.
The measures taken as a whole are positive but also predicated on much uncertainty, such as the outcome of United States-China trade talks. Directing more official help to private businesses is certainly a smart move, given that these are the true engines of growth, being more efficient and nimble than the cosseted state-owned enterprises. They also generate the vast majority of jobs in China, which make them critical instruments when the goal is to create 13 million jobs this year at a time when factories are cutting back or shuttering, prompting fears of social unrest. This parlous state is partly the result of a government crackdown on shadow banking that has also throttled much needed funds for smaller firms.