Resource tax reforms to go nationwide
A senior economic planner confirmed yesterday that Beijing would eventually extend nationwide the resource tax reform being introduced in the western region of Xinjiang .
Xinjiang started levying a 5 per cent resource tax this month on crude and natural gas sales, instead of output, in a bid to boost revenue.
Du Ying, vice-chairman of the National Development and Reform Commission, said the tax would cover crude oil, natural gas and coal, but the rate could vary from one product to another.
'As for the resource tax issue, the central government has already decided to start a trial programme in Xinjiang, and the scheme will be promoted nationwide based on the experiences [there],' Du said at a briefing on development in the west. 'But the tax rates for different resource products may be different.'
Premier Wen Jiabao said earlier this week that the government was on the verge of expanding the resource tax trial throughout the west and that it would also cover coal production.
Jing Ulrich, chairwoman of JPMorgan's China equities and commodities, said the resource tax reform was part of a new round of support measures for western China announced in recent days. 'In addition to amending the pricing of domestic resources, the tax reform would also represent a significant move to support local economies in the resource-rich inland regions that remain underdeveloped relative to the country's coastal areas,' she said.
The central government will offer credit support, land discounts and lower corporate tax to boost growth in the underdeveloped region.
This year is the 10th anniversary of western development plan, and the government has marked the occasion by vowing to intensify its efforts. At a conference on the development of the country's west chaired by President Hu Jintao on Monday and Tuesday, the central leadership pledged to spend billions of yuan to speed up economic growth in the region and raise people's living standards.
The spending is also designed to bolster social stability in the west, home to most of the mainland's ethnic minorities.
Wang Tao, chief China economist for UBS Securities, said the new policy initiatives reflected the government's intention to further push growth into the poorer inland regions, especially the west.
This week's central work conference discussed and approved a new 10-year development programme for the west, beginning next year. The NDRC announced on Tuesday that China would start 23 new projects in the region this year totalling 682.2 billion yuan (HK$783 billion).
Referring to the NDRC announcement, Wang said she expected the central government to 'announce new investment plans or new stimuli for 2011 and beyond, at the end of this year'.
'These investment projects could be part of the 'developing the west' initiative,' she said.
Du said the government would draw up policies that encourage private investment and give commercial banks incentives to lend more to the region. He said the government would also step up efforts to help companies raise funds through other channels such as bonds and stocks.
Du said the west had received 2.2 trillion yuan in capital investment on 120 major projects between 2000 and 2009 and expected more funding in the next 10 years.
The government aims to double the size of the west's economy from 2008 to 2015. That means the average annual growth rate would have to be 10 per cent over the next five years, compared with the average nationwide growth rate of 8 per cent. That is a conservative target by recent standards. The west's economy witnessed a robust average annual growth of 11.9 per cent over the past decade.