> Beijing also has been giving big rebates on the VAT to subsidize exporters.
One of the actions of the NPC was to equalize foreign and domestic tax rates. China is becoming an attractive enough destination is there is no need to attract investment by lowering taxes.
In any event, government revenues are coming in and there is enough money to pay for things.
> Beijing is too far away to stop local officials from collecting taxes that have been eliminated.
No they aren’t. What has happened in the last fifteen years is this dance. Beijing bans X, local officials respect ban, but try to collect revenue using method Y. Beijing ban local officials from using rural credit cooperatives as cash machines. They set up tariffs. Those get banned. They set up fees. Those get banned. They set up land sales. Those are now banned.
The basic problem is that local governments are broke.
What makes this time different is that finally the central government is coming in and paying for things, because they now have the cash to do it from the VAT. Setting up a proper tax system was something China tried and failed to do in the 1750’s, and it was the *big* reason why China went through hell in the 19th century, and now in the 1990’s, it’s finally done it.
(No taxes -> no armies -> no armies, you are at the mercy of your neighbors. That $70 billion that the PRC spends on its military might seem like a waste, but if it spent zero, I can assure you that China is going to be at the mercy of Japan, Russia, and the United States, and we are going to be back to the 19th century. If you want to see the consequences of “lets talk peace and hope people are nice to us” ask the Tibetans.)
> Everyone still has to pay for books, uniforms and tuition, so where is this “education” fund?
They are starting with the poorest Western provinces. They started last year with 50 million children. Last count they are up to 150 million kids.
> Chinese hospitals require payments up front.
And they’ll get it from insurance payments in NCMS. As with the education fund, the government is starting with the poorest counties and working their way up.
> The banks are still corrupt, witness the furor over one of the big 4 accounting firms tallying a $900 billion NPL ratio for the 4 big state owned banks, which also pretty much wipes out much of the savings of average chinese.
We covered that here. If you look at the archive, I went through and pointed out exactly where Ernst and Young couldn’t add right, and double counted about $300 billion. The total figure for NPL’s was about $500 billion. Of that about $300 billion from the SOE’s has been paid off over the last ten years, and that will done when they close the asset management companies next year.
That leaves about $200 billion in bad loans in the rural credit cooperatives and joint stock cooperative banks, and fixing those is on the todo list.
> China has to pump money into the US so we can buy all of those exports made by slave labor.
Actually, I see the money that China is paying the United States as something akin to “military tribute.” The money that China is paying the United States has the effect of allowing the United States to keep reliable oil supplies from the Middle East, while at the same time preventing the United States from acting in ways that are extremely adverse to Chinese national interest.
Let’s be clear on this. Without Chinese money, the US would be pulling out of Iraq in six months at the most. With Chinese money, the United States is telling Chen Shui-Bian to shut up every time it talks about Taiwan independence.
If you want to see slavery go back to the 1960’s. Until 1978, you couldn’t choose your job, under centralized socialism, the government was the only employer and you did what the government told you to do. The market has eliminated that.
Since 1978, China has moved about 300 million people to the middle class, and has at least guaranteed basic necessities for the remaining 900 million. That’s further along than Deng Xiao-Ping planned.
If you assume about 8% economic growth, then get 1.3 billion people up to Western standards from 1978 is going to take about a century. If you seriously think that you can do better than that, I’d be interested in how.
I’m not interested in abstract political philosophy, and I have very little respect for “magic wand” solutions. I want numbers and concrete proposals. How much is this going to cost? Where is the money going to come from? Who wins? Who loses? How long is it going to take? What are the political challenges? What are the risks? What are the benefits? What are the assumptions that you are making? What if they are wrong?
It’s answering these sorts of questions that gets anything done in business and politics, otherwise you end up with discussions that are just pointless at best, and tremendously harmful at worst.