China passed two landmark laws at the National People’s Congress (NPC) in March in a controversial move to protect private property as well as bring to an end nearly three decades of tax breaks for foreign investors.
The laws are in line with improving not only the efficiency of economic growth but also its quality, Chinese Premier Wen Jiabao told the 3,000 delegates at the opening of the 10-day meeting.
The property legislation, which overcame opposition from conservatives, effectively grants private and public property interests equal rights. Although there are bound to be issues in the implementation, it represents one of the most explicit moves so far to protect private wealth and is seen as a stepping stone towards a legal system that can handle an increasingly market-driven economy.
The new tax law, which will introduce a unified rate of 25% for foreign and domestic enterprises, is similarly progressive. Local companies can expect to benefit as their tax contributions fall from 33% while foreign firms will no longer be able to exploit preferential rates as low as 15%.
Two decades after it first opened its doors, China is withdrawing some of the perks that brought foreign business and nearly US$700 billion in investment to its shores.
Yet the recurring theme in Wen’s opening address, and in his press briefing which traditionally follows the end of the meeting, was an abandonment of the growth at any cost mentality. He pointed to energy savings and improved environmental protection as the priorities for 2007, once again setting a growth target of 8% – which, again, will probably be missed. Placed alongside references to wasteful bureaucrats who "compete with one another for lavishness", it would appear that Beijing’s tightening efforts won’t be restricted to macroeconomic policy.
At the press conference, Wen directly addressed the problem of corruption, pledging to "push forward political reforms and reduce the over-concentration of power and strengthen people’s supervision over the government".
This was accompanied by a restated commitment to closing China’s wealth gap. To this end, Wen announced a 15.3% rise in rural spending to US$50.6 billion and wider-reaching health, education and social security programs.