Chinese Economics Thread
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FriedRiceNSpice
Captain
What's wrong with capital gains tax and inheritance tax? China should have implemented all three forms of tax a decade ago.
Can't really say that China has the Anglo-Saxon model (as in the monopolistic East India company model) fully, as a good part of China's economy is already following another German model --- the Bismarck model of state capitalism.
You must be referring to the Ordoliberalism model by Walter Eucken, better known as Social Free Market model. This model dismantles and prevents the rise of monopolies and cartels in favor of SMI, along provides a strong social welfare net. Ordoliberalism is used to explain why Germany's economy continues to thrive while fellow former Axis member Japan's economy deflated in the same modern period.
The popularity of Jack Ma, Alibaba, Pony Ma and Tencent are all overstated in China by Western views. They're not that popular, nor even moral. Tencent for example, engages in microtransactions from its many games, and there should be more regulation against game exploitation among children and teens. Not just in China, but worldwide against all game makers, including the likes of EA, Activision, Blizzard and so on. Platform taxes should also be examined like those in Google and Apple's app stores. There is also the practice that binds a vendor for using one platform not to use another, like if I am a seller in Alibaba, I can't use JD, and so on.
These are useless tech industries, unlike real useful tech industry, such as SMIC and YTMC (chips), or BYD and CATL (batteries).
Even in the West, useless tech industries (Apple, Google, Microsoft, Facebook, Amazon, etc,.) are starting to get their much deserved regulatory clampdowns. These companies no longer advance the industry as they were, and furthermore, their acquisitions --- buying up small innovative companies only to have them disappear later with nothing to show for --- maybe dampening innovation as opposed to furthering it. Furthermore, few companies and their oligarchs and moguls are controlling what can and cannot be said in media.
It should be remembered that European regulation against Microsoft in the early 2000s is what led Google, Apple and Amazon to be what they are today, and these companies innovated and led to the internet being what is today. However, today, these companies are essentially now what Microsoft was 20 years ago, too big for their britches, and potentially capping and harming the growth of future innovative startups.
China doesn't have a property tax, a inheritance tax and no capital gains tax ?And China is suppose to be a communist nation. China allows the rich to keep more of their wealth than America.
I support the property tax but not the other two. But I don't like where this is all going. The road to hell is paved with good intentions.
@solarz
@plawolf
@SleepyStudent
Here's my understanding of how it happens.
Wealth accumulation actually has a positive feedback cycle due to random stochastic processes.
Most wealth is held in the form of property or financial assets. If you hold these over a 10 year timeframe, it is essentially a guaranteed return of 7-14% per year. But that isn't the result of any skill. It is just riding inflation plus increasing wage levels in society. It's basically just receiving a rent.
In addition, the more wealth you have, the more often you play the wealth accumulation game. After multiple transactions and rounds, random stochastic events means that wealth accumulates towards the top whenever the game is played.
Now, individual skill or ability does matter, particularly at the bottom of the game.
But as individual wealth increases, it is less and less to do with skill or ability, but rather random events (luck in other words).
That would put a very different perspective to capital gains and inheritance taxes
Come on, you can't be seriously grouping our esteemed members here with years of wisdom and knowledge with a student? Seriously!
No it shouldnt had. Why should China tax their wealth so much when it was still not rich?
Wealth is necessary to support growth of the country in all aspects
However now that China has gotten extremely "fat" (you know, the 0,0001%) its time to redistribute this wealth by various means.
IMO Inheritance tax could be problematic to get implemented
For property taxes it is also difficult as property serves as an investment vehicle for the Chinese people.
Maybe the capital gain tax could be implemented as long as it doesn't hit the common people ie. Capital gains above $1.000.000 should be taxed, maybe even target it to the "useless" companies and expemt the taxes for strategic industries such IC, green industries, EVs, manufacturing sector etc
solarz
Brigadier
China doesn't have a property tax, a inheritance tax and no capital gains tax ?
I support the property tax but not the other two. But I don't like where this is all going. The road to hell is paved with good intentions.
The mistake you're making is assuming China has the same economic dynamics as the US.
The Chinese government's main source of revenue is it's SOEs. Until 5-10 years ago, there was no need for other forms of taxes.
The first major form of tax added in recent years was the property transfer tax. Due to the crazy nature of Chinese real estate, property transfer taxes are a massive source of revenue. This is something akin to the capital gains tax.
Property taxes have been proposed for years because real estate is the main source of investment for Chinese families, so there are a lot of empty apartments out there (or were, as things may have changed recently). As for the inheritance tax, I suspect it's coming because the boomers are getting of age, and they are the main holders of wealth.
Finally, China is not doing wealth redistribution. China is using state resources to improve the living standards of the poor and create opportunities for them to improve their financial circumstances. This includes things as fundamental as helping them with family problems so they can send their kids to school. Check out CGTN's poverty alleviation documentaries for more details, it's really an eye opener.
A property tax will reduce the pressure to sell land for funding at the local government level. And it will help to restrain the property bubble.
On the other hand capital gains tax and inheritance tax takes away the resources that otherwise entrepreneurs and companies could use to re-invest into their businesses.
America has both capital gains and inheritance taxes and it has done nothing to reduce the wealth gap. It has only taken away the resources that otherwise could have been used for productive investments.
A warning sign for China is what is happening in California what once was the wealthiest state in America is now a mess.
If they implement all these measure's or just some of these measure's will just lead companies to leave China in greater numbers for lower cost countries.
Wouldn't that be political risky though?
This tax would seriously affect the common people.
I dont believe that CPC would do something risky like this and affect everyone. Most likely the Chinese Gov would try to target the tax to the wealthier people in order to make the tax politically "safe".
Same reason with the property and capital gains taxes.
Ideally the Gov would "slowly boil the frog" by putting these taxes to the wealthy (>$1.000.000?), which would be massively supported by the people and then after 3-5 years phase it to lower incomes as well.
Dont forget that there is also talk about raising the retirement age. IMO there is no way that the Gov would double-bomb the old people by raising the retirement age AND putting inheritance taxes
solarz
Brigadier
Why would it be risky?
Inheritance tax wouldn't affect the quality of life of seniors. An inheritance also means you're wealthy. Most people in China will not be affected much by this.