Beijing, April 12 (IANS): Chinese Prime Minister Li Keqiang has urged local governments to push forward supply-side structural reform to help stabilise economic growth.

Local authorities should continue to cut red tape, implement tax breaks, encourage innovation and eliminate outdated capacity, Li said on Monday during a meeting participated by the governors of Hebei, Liaoning, Jiangsu, Shandong, Hunan, Guangdong and Qinghai provinces, and the mayor of Chongqing municipality.

According to the premier, China needs joint efforts from central and local governments to face up to economic challenges, the China Daily reported on Tuesday.

The plan to replace business tax with value-added tax should be "vigorously pressed forward to guarantee tax burdens are reduced in all industries and small firms actually benefit," according to Li.

Talking about the overcapacity seen in provinces such as Hebei and Liaoning, Li said excess capacity in coal and steel production should be eliminated so traditional economic engines can be fine-tuned. 

The premier stressed the importance of maintaining market liquidity, making the financial sector better serve the real economy and introducing debt-for-equity swaps to gradually bring down the corporate leverage ratio.

He promised all central government budgetary investment will be allocated within the first half of this year.