China Mulls Slashing Taxes Next Year to Boost Growth

Top Chinese officials are currently huddled at the annual Central Economic Work Conference in Beijing, where leaders are expected to come up with changes to old policies or implement new ones, according to the state-run Xinhua News Agency. The meeting ends Wednesday, according to the Economic Observer newspaper.

One possible scenario that China is looking into is slashing taxes in 2012 to help boost economic growth in the face of an export slowdown.

Analysts from China International Capital Corp., Goldman Sachs Group Inc. and Barclays Capital see China potentially clipping taxes next year after revenue surged past the government's target this year.

China's revenue expanded 10.6 per cent in November from last year's figures of $101 billion. But it was a sharp fall month-on-month from October's 16.9 per cent and September's 17 per cent recorded growth.

Analysts said imposing lower tariffs would help spike consumption without the bad-debt risk scenario that resulted from the $2.8 trillion lending in 2009 and 2010 for infrastructure projects as well as real estate speculation.

"China is no longer able to rely on massive investment in infrastructure building to stimulate the economy," Yao Wei told Bloomberg News. "Tax cuts are unavoidable."

The EU fiscal crisis has badly affected China. EU is China's most important market for exports, its main driver of economic growth. In October, it grew 15.9 per cent to $157.49 billion compared a year ago. However, it was the lowest growth rate seen for exports in five months.

The government's campaign to control property prices has threatened home sales and construction.

China's growth has cooled to 9.1 per cent last quarter.