Beijing has turned to tax cuts to counter both the slowing economy and the US tariffs.
China has unveiled a $298 billion tax cut plan in order to prop up its slowing economy after US President Donald Trump launched a trade war against Beijing.
The Chinese parliament introduced a new budget plan at the opening of the country’s annual meeting on Tuesday, offering tax cuts for all companies.
The manufacturing, transport and construction sectors are all expected to benefit from the plan.
Taxes will be slashed by almost $298 billion in 2019. Beijing will cut the rate of value-added tax (VAT) for manufacturers to 13 percent in 2019, from the current level of 16 percent. The VAT rate will also decrease from 10 percent to nine percent for the transport and construction sectors.
As the growth rate of the Chinese economy slowed following US-imposed tariffs on Chinese goods worth billions of dollars last year, Beijing has now taken new measures to reignite its economy, using tax cuts as the first line of defence to reverse the losses.
Li Keqiang, the country's top economic official, set this year's growth target at 6 to 6.5 percent, reflecting determination to shore up a cooling, state-dominated economy and prevent politically dangerous job losses.
China aims to create more than 11 million new urban jobs this year and keep the urban unemployment rate within 4.5 percent, in line with its 2018 goals. At the same time, it will cut social security fees paid by companies.
Since Trump came to office, he has questioned Chinese trade practices.
In 2017, the US introduced tariffs on Chinese goods worth billions of dollars. Beijing responded with retaliatory tariffs.
The world's two biggest economies have also been engaged in an economic conflict over US allegations that China steals technology and forces foreign companies to hand over trade secrets in an aggressive push to challenge American technological dominance.
Together with tariffs which were already imposed, both sides threatened each other for imposing further tariffs.
In December, both countries reached an agreement to delay new trade tariffs for 90 days, however, both sides are still yet to reach an agreement.
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), warned countries about a new storm that will hit the world’s economic output in a talk at the World Government Summit in Dubai on February 10.
In January, the IMF revised down its projection for global economic growth for 2019 to 3.5 percent from the 3.7 percent it estimated only three months earlier.