As China prepares to begin the formal implementation of its tax reform, it has announced an investment tax subsidy of US$1 billion ($861 million) to help its exporters.
The move is aimed at helping US manufacturers avoid a steep hike in their taxes by shifting their investments overseas, a move that will likely have ripple effects for the Chinese economy.
The subsidy will come on top of US $300 million already committed to help Chinese firms with the implementation of the tax reform and the US$5 billion in investment subsidies the Chinese government is expected to give to US companies as part of its efforts to expand trade and diversify its economy.
According to a Chinese government news agency report, the subsidy is part of China’s efforts to stimulate the country’s economy and boost its competitiveness.
The announcement was made by the finance ministry, China’s main economic adviser, in a speech at a forum for international business executives in Beijing on Thursday.
The announcement comes at a time when China is facing criticism for its handling of its own debt, particularly after a global financial crisis that has left it with an economy shrinking and with mounting debt.US President Donald Trump and his aides have previously argued that China is cheating on its debt payments.
But analysts said the latest move was unlikely to help the US economy, which has been hurt by falling manufacturing jobs.
China is already suffering from slowing economic growth and a decline in exports to the US that could be exacerbated by the tax reforms, according to Bloomberg.US companies have been particularly sensitive to China’s tax policies, as it has imposed a tax on capital gains and dividends from foreign companies.