China's fiscal policy in 2019, including a combination of tax cuts and fee reductions for companies announced during the National People's Congress, will increase support for economic growth, said a report from Moody's.

The rating agency estimates that the overall fiscal impulse this year will be 6.6 percent of GDP, up significantly from Moody's calculation of a 4.7 percent of GDP outcome for 2018, after taking into account special bond issuance by local governments and excluding various fund transfers.

Supports from the fiscal policy will partly offset the negative economic impact of the country's deleveraging and de-risking policies, it said.

In a separate report, Moody's said that the new tax cuts – which include value-added tax reductions for the manufacturing sector, to 13 percent from 16 percent, and for the transport and construction sector, to 9 percent from 10 percent – may curb revenue for local governments.

Given that half of VAT revenue goes to local governments, Moody's estimated their VAT revenue may decline by 300 billion yuan ($44.71 billion) to 400 billion yuan this year.

"Assuming total infrastructure spending this year is similar to the 17.3 trillion yuan of 2018, there will remain a large financing gap to be filled by State-owned enterprises, including local government financing vehicles, which will be subject to greater central government monitoring and regulation", Martin Petch, a Moody's analyst, and his team wrote in the report.