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China to give more financial aid to small firms

China will boost its support for small firms by cutting their taxes, increasing their subsidies and encouraging banks to step up lending to them, Premier Li Keqiang said on Wednesday.

Companies with monthly sales revenues between 20,000 yuan and 30,000 yuan ($3,258 and $4,887) will have their tax bills waived, Li told a weekly meeting of the State Council, or cabinet, in remarks published on the government's website.

Leon Neal | AFP | Getty Images

To reward small and micro-sized companies that hire workers who cannot easily find employment, the government will give these firms social insurance subsidies, Li said.

Banks will be encouraged to come up with plans that focus on lending to small and micro-sized companies, and the government will lend its support to firms by buying their goods and services, he said.

The pledge to support companies came as China's economy appeared to be stumbling again.

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Data last week showed China's factory output grew in August at its weakest pace in nearly six years, raising fears that the world's second largest economy may suffer a deeper downturn if authorities do not further loosen fiscal and monetary policies.

Market speculation that authorities may act to steady growth was stoked again on Wednesday when domestic media reported that China's central bank had injected a total of 500 billion yuan into the country's biggest banks.

But analysts were divided over whether the funds, disbursed through a standard lending facility in the form of 3-month loans, would filter through to the real economy, or were simply a way to help banks overcome liquidity shortages.