Opinion | Lower taxes across the board are the key to greater domestic consumption
As economic growth eases, the nation's new leaders are wondering where to steer the ship. Leaving more in people's pockets would help
Last Thursday's rout on global stock markets, partly triggered by a weak reading for China's purchasing managers' index, has reflected investors' renewed concerns over the state of the mainland economy.
According to a preliminary survey published by HSBC, the PMI for the manufacturing sector fell to a seven-month low of 49.6 per cent in May from 50.4 in April. The fall was worse than expected and below the mid point of 50, indicating that the mainland's industrial sector had started contracting.
Cutting taxes, and efforts to create jobs, is a better option than cutting interest rates
This has led more analysts to urge the mainland leadership to boost fiscal spending and infrastructure investment with some even murmuring that the central bank may cut interest rates in the coming days.
How to steer the economy has become the most pressing challenge for the country's new leaders including President Xi Jinping and Premier Li Keqiang since they came to power late last year.
So far, both Xi and Li have resisted pressure at home and abroad by allowing the economy to ease, creating a favourable environment for drastic reforms and economic rebalancing.
Li has repeatedly said that the government has limited scope to boost fiscal spending or unleash more stimulus. Last week in Switzerland, Li reportedly expressed no undue concerns when asked about the latest dismal data.