China to reduce taxes for high-tech firms penalized by Trump's tariffs

China will lower the value-added tax rate on companies from the high-tech, manufacturing, transportation, construction and agricultural sectors from 1 May in order to offset the tariffs imposed by Trump on Chinese imports to the US.

The decision was expected to boost domestic demand and to spur the economy with the savings accruing to Chinese firms pegegd at 240bn yuan with the tax rate levied on the manufacturing sector set to be cut to 16% from 17%, while those on the rest would be lowered to 10% from 11%, with high-end manufacturing and innovation-driven technology firms expected to benefit directly.

According to Goldman Sachs, the reduction had positive implications, despite being small in magnitude.

"We expect details of other tax cut measures to be announced in the coming weeks, including the adjustment to personal income tax in terms of higher minimum threshold and exemptions for some education and health expenses and import duties, on cars and other consumer goods," Goldman said.

US administration officials said that tariffs on Chinese imports could have to wait until June to come into full effect, even as Chinese and US officials hold talks aimed at reaching an agreement to soften them.

Thus far, China's response to the $60bn of tariffs levied on their products had been fairly muted, with just $3bn of counterlevies on American products having been announced, as Beijing tried to avoid an all-out trade war.

At the last World Economic Forum in Davos, Chinese president Xi had said "Pursuing protectionism is like locking oneself in a dark room."

"While wind and rain may be kept outside, that dark room will also block light and air. No one will emerge as a winner in a trade war."