China seeks bigger voice in global finance issues
Ministry of Finance vows to proceed with delayed value-added tax plan despite slowdown in local government fiscal income.
Finance Minister Lou Jiwei (樓繼偉) has set the tone for fiscal policy for 2016, calling for China to take a proactive role in governing international finance and proceed with reforms to value-added tax.
Such actions were necessary as the country sought to cement its influence over global and regional economic issues, Lou told the national fiscal conference on Monday.
Lou said the government would also seek to reform income tax and consumption tax but did not mention the long-awaited property tax.
His words follow the legal formation of the China-led Asian Infrastructure Investment Bank on Christmas Day and an announcement that the Beijing-based lender plans to make its first loan by the middle of 2016.
READ MORE: China-led Asian Infrastructure Investment Bank just months away from first loan
Meanwhile, the Shanghai-headquartered BRICS Development Bank has revealed it plans to enter Chinese financial markets to fund its investment projects.
It is in discussion with European and Asian countries to set up cooperation banks to push President Xi Jinping’s (習近平) “One Belt, One Road” development strategy aimed at better connecting the region.
The finance ministry says China will run the two banks as a joint effort with member
countries to increase their operational effectiveness.
It has also promised to promote economic policy conciliation, structural reforms and infrastructure investment among G20 nations.
“Whether it is to help enterprises expand overseas or protect China’s long-term overseas interests, China needs to set up an institutional mechanism to cement its voice in global issues,” said Renmin University professor Wang Yiwei.
Wang said bureaucracy and ideology prevented lenders such as the Asian Development Bank, which is dominated by the United States and Japan, from meeting the demands of developing countries.
China should have a bigger voice than Japan in regional and global economic issues due to its larger economy, Wang added.
READ MORE: The rise of the renminbi: how adding China’s yuan to IMF’s SDR basket will spur the currency towards further reform
Lou’s address to the national fiscal conference came after another conference, the central economic work conference, outlined the country’s priorities for 2016.
The central economic work conference concluded that taking a more proactive fiscal policy, such as by reducing tax, was among the country’s top tasks.
In wrapping up the fiscal conference, the ministry said it would expand the scope of value-added tax to the construction, property and financial sectors next year.
Whether it is to help enterprises expand overseas or protect China’s long-term overseas interests, China needs to set up an institutional mechanism to cement its voice in global issues
China launched a trial reform of value-added tax in Shanghai in 2012, with the aim of reducing duplicate taxation and reducing corporate costs.
But further reform was delayed this year when local governments were hit by a slowdown in fiscal revenue.
Gao Peiyong, a researcher with the Chinese Academy of Social Sciences, told a forum that Beijing had hoped the reform would reduce tax by 1 trillion yuan (HK$1.198 trillion), but that so far it had only resulted in a reduction of 200 billion yuan.
He wondered how far tax reductions could go without increasing property tax or income tax.
