A.On New Year’s Eve, the Chinese government gave the few remaining foreign skilled workers, whose number is estimated at a few hundred thousand in the billion-dollar nation, a belated Christmas present. Until recently, the foreign chambers of commerce had assumed that Beijing would take its announcement seriously that it would start charging expats to the cash register from 2022 onwards. According to this, the cost of teaching the children at international private schools as well as the rent of the apartment, which together with a family of four can quickly exceed the mark of 150,000 euros per year, would have had to be taxed differently than before.
Because the additional burden for many self-employed and employees would have been tens of thousands of euros a year as a result, the chambers had feared that in cities like Shanghai the number of foreigners, which had already fallen sharply in the pandemic, could fall by half again. Now, however, the Beijing Treasury Department has extended the tax exemption by two years at the last minute. The fact that this prevents an exodus of skilled workers and consequently upholds competition and innovative strength in the Chinese market is “good for China itself,” says the President of the European Chamber of Commerce, Jörg Wuttke.
Low consumption gives leaders headaches
Indeed, the leadership’s turnaround can be interpreted as a sign of concern about China’s economy. This should not only suffer from the spread of the Omicron virus variant in China, which has only officially occurred a few times there thanks to the country’s isolation. The fear of lockdowns like in the city of Xian, which has a population of 13 million During the nationwide vacation that has just ended, travel activity decreased by a fifth compared to the previous year.
But it is not just the weak consumption that worries the leadership. In view of the high debt in the public sector and low productivity growth, many observers believe that the times of high growth rates in the People’s Republic should be over anyway. Officially, bank economists assume on average that China’s economy will grow by around 5 percent year-on-year in 2022. Internally, however, according to information from the FAZ, international management consultancies have long been discussing scenarios according to which China’s growth rate could fall to 2 to 2.5 percent in the coming years.
That would be too little to become a “fully developed and rich nation” as planned in the next 30 years. Currently, the average income of the Chinese is around $ 10,000, one sixth of the US. Vice-Prime Minister Liu He, who is responsible for the economy, has called for China’s rise to have to rely less on investments and more on “technological innovations”.
However, this goal is met with political contradictions. In an attempt to subject the private Internet industry to government targets through tough regulation, Beijing has reduced the market value of companies by around $ 1 trillion since autumn 2020. The transport service Didi Chuxing has to withdraw from the stock market in New York after only six months. On Tuesday, the government announced that operators of online platforms will now have to undergo a security check if they want to raise capital for their expansion on a foreign exchange. This is likely to deter many companies, which could have a negative impact on their innovative strength. After all, the “discipline” that foreign investors have trained many companies in China “does not necessarily come from within their own system,” says former head of Morgan Stanley’s Asia operations, Stephen Coach.