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A source of confidence

(China Daily)
Updated: 2009-01-06 07:40

The deep national coffer that China enjoys makes a good cause for optimism about the country's ability to maintain stable and relatively fast economic growth in spite of the ongoing global slowdown.

Yet, more important than the sheer size of China's expanding fiscal revenue are the structural taxation reforms that Chinese authorities are considering in order to boost domestic consumption and cut the tax burden on businesses.

Finance Minister Xie Xuren revealed yesterday that China's 2008 fiscal revenue was expected to top 6 trillion yuan ($857 billion). That will mark a one-sixth increase over the 5.13 trillion yuan that the government collected in 2007.

Though the growth of fiscal revenue has considerably slowed along with the Chinese economy, the sheer size of the national coffer still adds a lot to the public's confidence in the $586-billion stimulus package the central government announced later last year.

With such an adequate supply of fiscal fund, it is perfectly reasonable to believe that the central government will act swiftly and effectively to cushion economic growth in following months against the global financial crisis.

As the global growth outlook turns gloomy and external demand for Chinese exports declines more rapidly than expected, it is necessary for the government to quickly stimulate domestic demand with aggressive fiscal expansion.

Nevertheless, to facilitate the underlying change of China's growth model, structural taxation reforms are badly needed to leave consumers more money to spend and enterprises a lesser tax burden to bear.

For many years China has relied heavily on exports for economic growth. But as recession seems inevitable this year in almost all major developed economies, the country can no longer count on double-digit export growth as its major growth engine.

To tap into the huge potential of the domestic market is the best way to sustain China's long-term economic growth. That retail sales rose 13 percent year-on-year on the first three days of 2009 is fresh evidence that Chinese consumers are more than willing to spend.

If some specific taxes can be cut substantially and swiftly to encourage enterprises' investment and enhance consumers' purchasing power, the domestic market will surely prove more dynamic.

It is hoped that the authorities will take bold steps to introduce structural taxation reforms that are crucial to both a sustained consumption boom and the transformation of the country's growth model.

(China Daily 01/06/2009 page8)