BEIJING, March 30 (Reuters) - China will set up a national guarantee fund of 60 billion yuan ($9.6 billion) to help channel more bank loans to cash-strapped small firms and farmers, the finance ministry said on Friday. China’s cabinet has approved plans to launch a national financing guarantee fund to be set up by the central government, with support from financial institutions, the ministry said in a statement.
The fund, with an initial size of at least 60 billion yuan, will provide guarantees for loans of around 500 billion yuan over the next three years, the ministry said.
“The establishment of the state financing guarantee fund will support the development of small firms and the rural sector,” assistant Finance Minister Xu Hongcai told a briefing.
The guarantee fund will encourage banks to make more loans to small firms and start-ups with limited collateral, he said.
The government will raise the threshold on annual sales for small-sized taxpayers to 5 million yuan, from 500,000 yuan for industrial firms and 800,000 yuan for commercial firms, as part of newly announced value-added tax cuts, the ministry said.
China will also lower the value-added tax (VAT) rate on the manufacturing, transportation, construction and other sectors May 1, saving 240 billing yuan in taxes this year, state media reported earlier this week, citing the cabinet.
The government will refund input value-added tax for qualified equipment makers, power grid companies and firms involved in research and development, the ministry said.
Combined tax cuts from the steps, including the 240 billion yuan, will amount to 400 billion yuan, the ministry said.
Premier Li Keqiang has pledged to cut taxes for firms and individuals by more than 800 billion yuan this year.
China has vowed to cut levies to lighten the tax burden of individuals and businesses as it looks to boost domestic demand in a year when economic growth is projected to slow from 2017. (Reporting by Kevin Yao; Editing by Sam Holmes)