Tax, cost cuts sought to help man­u­fac­tur­ers

China Daily (Hong Kong) - - FRONT PAGE - By LI XIANG in Bei­jing and HU MEIDONG in Fuzhou

Econ­o­mists called on the gov­ern­ment on Tues­day to ac­cel­er­ate eco­nomic re­forms, in­clud­ing tax and cost cuts to ease the bur­den on man­u­fac­tur­ers, af­ter a Chi­nese ty­coon raised the is­sue.

Auto glass ty­coon Cao De­wang told China Busi­ness News that pro­duc­tion costs in the United States are lower than those in China. This was echoed by the busi­ness com­mu­nity, which is con­cerned about the Chi­nese man­u­fac­tur­ing sec­tor not only los­ing out to some South­east Asian coun­tries, but also to de­vel­oped economies such as the US.

They fear such wor­ries would drive more Chi­nese man­u­fac­tur­ers to move their pro­duc­tion sites out­side of China.

Qu Tian­shi, an economist at ANZ Group, said the gov­ern­ment should in­tro­duce more fa­vor­able poli­cies to fa­cil­i­tate the up­grade of the Chi­nese man­u­fac­tur­ing sec­tor and to boost its over­all com­pet­i­tive­ness.

“There is room at the cen­tral gov­ern­ment level to re­duce taxes next year, since the bal­ance sheet of the Chi­nese cen­tral gov­ern­ment is rel­a­tively sound,” Qu said.

China’s top lead­ers at the an­nual Cen­tral Eco­nomic Work Con­fer­ence last week de­cided that boost­ing the real econ­omy and rais­ing in­dus­trial com­pet­i­tive­ness will be key pri­or­i­ties of eco­nomic poli­cies next year.

“We al­ready sensed the sig­nal from the meet­ing that the top lead­er­ship will con­tinue the cor­po­rate cost re­duc­tion and im­prove­ment of the busi­ness en­vi­ron­ment in the com­ing year,” Qu added.

Cao, chair­man of auto glass man­u­fac­turer Fuyao Group, said the over­all tax cost for man­u­fac­tur­ers in China is 35 per­cent higher than in the US.

Cao in­vested $600 mil­lion to build a glass man­u­fac­tur­ing plant in the US that be­gan op­er­at­ing in Oc­to­ber. The

plant has cre­ated more than 2,500 jobs in the US, ac­cord­ing to the com­pany.

The Chi­nese ty­coon said that de­spite higher la­bor costs, the profit mar­gin for his com­pany’s US plant could be 10 per­cent higher than what it would be in China.

A se­nior ex­ec­u­tive at Fuyao Group who de­clined to be named told China Daily on Tues­day that the US in­vest­ment is part of the com­pany’s go­ing-global strat­egy, and Cao’s com­ments did not mean that the com­pany in­tended to leave the home mar­ket.

None­the­less, econ­o­mists said that the Chi­nese man­u­fac­tur­ing sec­tor is fac­ing a chal­leng­ing time as ris­ing la­bor costs, surg­ing prop­erty prices and a heavy tax bur­den at home have eaten into their profit mar­gins.

Xu Hong­cai, an economist at the China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes, said that China should pay greater at­ten­tion to out­flows of in­dus­trial cap­i­tal and come up with more ef­fec­tive poli­cies to make the do­mes­tic mar­ket more busi­ness-friendly.

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