E COnOMY
2017, US President Donald Trump unveiled
the guidelines of the long-awaited tax re-
form plan, which, if it passes Congress and
the Senate – a long and complicated process
where the plan is highly unlikely to survive
in its current form – would cut the corporate
income tax rate from 35 to 15 percent.
Although 33 percent of Chinese compa-
nies surveyed considered the tax burden in
the US to be heavier than that in China,
the percentage of the companies holding
the view, however, has continued to decrease
since 2014. In addition, most of the respon-
dents considered the US federal tax law to be
more reasonable than the tax rules in China.
The debates on tax rates of the two coun-
tries has been an untiring topic recently. In
early 2017, the words of Chinese auto-glass
tycoon Cao Dewang sparked a heated discus-
sion across China in both academia and the
industrial circle. He claimed that his recent
US$600 million investment in the US was
largely driven by China’s high taxes which
are 35 percent higher for manufacturers than
that in the US. “Tax cuts are key for com-
panies [in China] to make profits,” Cao, a
member of the Chinese People’s Political
Consultative Conference, said during the
two Sessions in March 2017.
In the opinion of Zhou Tianyong, a lec-
turer at the Institute of International Strate-
gic Studies of the Party School of the Central
Committee of CPC, an irking problem fac-
ing Chinese manufacturing enterprises is the
combined taxation burden – nearly 37 per-
cent in 2015, up from 16.5 percent in 1995,
21 percent in 2000, and 26 percent in 2005.
“China’s manufacturing industry has been
attacked from all sides by the tax burden,
high costs and rocketing real estate price,” he
said during an annual meeting held by the
China Business Times in December 2016.
Li Weiguang, a lecturer at Tianjin Uni-
versity of Finance and Economics, echoed
Zhou. In his recent studies on the relation-
ship between tax and enterprise perfor-
mance, Li found that enterprises would be
on the verge of bankruptcy if they paid all
the taxes required by law, which he described
as “fatal taxes.” He said government reform
of the corporate tax system is urgent, but
he also indicated that opposition to cutting
taxes would be strong.
The public outcry on corporate tax has
aroused the attention of the central govern-
ment recently. It is already one year since
China expanded the implementation of
value-added tax reform to all industries and
as of the end of April 2017, total tax cuts
under the reform are expected to reach 680
billion yuan (US$100 billion), according to
the country’s top tax authority.
The State Council, China’s cabinet, also in-
troduced a string of measures in April 2017
to reduce the corporate tax burden, includ-
ing simplifying the VAT rate system and
lowering the rates for agricultural products,
natural gas and some other industries. These
measures are expected to reduce the tax bur-
den of enterprises by about 380 billion yuan
(US$55 billion).
Liu Yuanchun, vice president of Renmin
University of China, however, claimed that
the outbound investment of Chinese enter-
prises was driven by a number of factors in-
cluding market fluctuations, economic glo-
balisation as well as entrepreneurial mindset.
For him, it is not appropriate to see China’s
outbound investment only through the lens
of tax rates.
“The glass industry in which Cao Dewang
was operating is actually a typical industry
suffering from over-production in China. It
needs both supply-side reform and the over-
seas market,” he told Xinhua News Agency.Challenges Ahead
Another conspicuous factor in the survey
this year was that 48 percent of Chinese
companies consider that complex China-
US relations have become a top concern and
challenge for Chinese companies in the US,
replacing high labour costs which were their
top concern for the previous three years.
What’s more, unfavourable federal govern-
ment policies, visa and immigration barriers,
and unfavourable State or local government
policies are also major challenges for Chinese
companies, reflecting their anxiety over the
potential negative effects that the new ad-ministration might bring to the China-US
economic and trade ties.
Some Chinese companies were worried
about more stringent government oversight,
and 35 percent of Chinese companies sur-
veyed believed that the “Buy American, Hire
American” initiative proposed by the new
US president might create more operational
challenges, and 83 percent of companies,
however, claimed that they will not change
their current investment plan and strategies,
showing their faith in the business prospects
in the US.
“We are especially excited about the pros-
pects of additional deregulation by the new
administration. However, I am also con-
cerned about the pace of deregulation imple-
mentation, particularly in regard to the for-
eign banking operations in the US,” said Xu
Chen.
Xu added that complying with regulations
is of utmost importance, but at the same
time, there needs to be more of a balance be-
tween business promotion and examination.
Given today’s extremely intensive examina-
tions, Xu said, much of “our time and energy
has been spent on regulatory cooperation,
rather than facilitating investment to create
more jobs for American people.”
Economists also claimed that the US$1
trillion infrastructure plan for the upcoming
10 years proposed by Donald Trump could
potentially provide more opportunities for
Chinese enterprises if it passes. Tempted by
the infrastructure spending plan, 41 percent
of surveyed Chinese companies view the
proposal positively as an opportunity to ex-
pand their businesses and at least 24 percent
of them are planning to increase investment
in the US to benefit from the policy change.
According to data from the National
Development and Reform Commission,
China’s top economic planner, China ranked
first worldwide in the mileage of high-speed
rails, expressways and urban transit systems
by the end of 2016. Statistics from the Na-
tional Bureau of Statistics also showed that
the investment on infrastructure in China hit
10.6 trillion yuan (US$1.54 trillion) during
the first 11 months of 2016, an increase of