World Bank urges China to spend more on public services

21 Dec 18

Spending more on health, education and social services could boost the Chinese economy, the World Bank has urged.

China has experienced slowing growth and weakened trade as a result of tension with the US, as exports have slowed.

GDP growth slowed to 6.5% year-on-year in the third quarter from 6.8% in the first half of 2018. It is projected to moderate to 6.5% at the end of this year and 6.2% in 2019-20, the World Bank said in its China Economic Update yesterday. 

But the government could “stimulate the economy” by shifting government spending towards social services, health and education, it said.

Elitza Mileva, World Bank senior economist, said: “Such measures would create jobs, deliver higher-quality public services, and provide better support to vulnerable families.

“In the short term, these measures would encourage households to save less and spend more. In the long run, they would boost worker productivity and China’s growth potential and help the country achieve a more equal society.”

In response to the slow growth, the Chinese government introduced tax incentives for households and companies. It also increased local government spending, the bank said.

This included raising the minimum threshold for personal income tax and reducing the health and education expenses that households pay.

The government also raised the VAT refund rates in November.

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