China Using Its VAT To Highgrade Manufacturing
Posted by Dan on April 24, 2008 at 05:46 PM
The China Economic Review is just out with an article by CLB's own Steve Dickinson on the wholesale changes China has made to its VAT (Value Added Tax) system. The article is entitled, "VAT’s all folks: How changes in the tax system reflect an evolving approach to foreign investment." The article is on how China has changed its VAT rebate system to bring it in line with its policy of encouring higher value, lower pollution, industries, or as Steve puts it,“quality not quantity.”
Check it out.
Comments
It is a well written article. But the critic in me, not in anyway knocking Steve's writing, does have to wonder about the ability of the VAT scheme to enact any sort of fundamental change in the overall dynamic of the manufacturing philosophy here in this country. Not to sound glib or anything, but the closest China got to value-added 10 years ago was attaching laces to shoes. It's just not in the manufacturing nature here in China to go above and beyond what has been already done before. And, to a large part, I can't really blame the manufacturing sector for that. It's made billions off of being generic. And that's the inherent problem. Unless producers begin to realize quickly that there are other fish in the sea (see: Vietnam, Laos, Cambodia) who can do the same thing for -- what is quickly becoming -- a lot cheaper, the manufacturing sector here in China is going to be in for a world of hurt in the next couple of years, particularly with the downturn of the US economy.
Posted by: Paul | April 24, 2008 9:12 PM