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Personal tax cuts will boost Chinese domestic spending says Aubrey Capital Management

The Chinese middle classes could soon become more affluent thanks to a significant tax boost for lower earners, says Aubrey Capital Management.

Aubrey Emerging Markets fund manager John Ewart said, “The Chinese government is reducing the levels of taxation that are applied to the working population and this increase in disposable income is expected to support the consumption dynamic which has been an important driver in the growth of the service industries in recent years.

“The Ministry of Finance periodically reviews income tax rates and allowance sums, and this had not been reviewed since 2011. The average citizen has enjoyed over 9% annual disposable income growth since then and this has resulted in an increasing number of workers falling into the tax net.

The recently introduced change* will raise the minimum threshold for paying personal income tax from Rmb42,000 to Rmb60,000 per year, and the Ministry of Finance estimates the share of the population paying tax will fall from 44% to 15% as a result. Next year, taxpayers will be allowed to deduct expenses related to children’s education, interest on home mortgages, housing rent and treatment for serious diseases.

“Although this is not a direct response to the trade dispute, we expect this initiative to compensate to some extent and believe that the increased disposable income will be embraced by consumers and have a positive economic impact,” said Ewart.

Aubrey’s GEM fund philosophy is driven by its proprietary ‘Wealth Cycle’ - a proven method of finding companies who are benefiting from different stages of economic growth in emerging economies.

*The change to the income tax threshold took effect on Oct. 1 this year, while rest of the amendment will go into effect on Jan. 1 next year.

Notes to editors

About Aubrey Capital Management Website:

Aubrey Capital Management Ltd is a specialist investment manager with a focus on global conviction funds.

Founded in 2006 and incorporated in Edinburgh, Scotland, Aubrey is a privately held company with all its shareholders actively involved in managing the business. The Aubrey team has collective investment experience of over 120 years in the UK, USA, Europe, Asia and Emerging Markets, and an impressive track record of managing similar global funds in the past. Compliance Notes

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Issued on behalf of Aubrey Capital Management By Sam Shelton, Senior PR Manager Fortuna Asset Management Communications Ltd. Tel: (+44) 07540 336998

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