Evidence shows that China will enter an era of "wage increase and tax reduction", says a signed article in the Beijing News. The following is an excerpt.

The Shanghai municipal government said recently that it would directly tackle the relatively low wages paid to workers in Shanghai. Before that, Guangdong Province also said clearly that the government would force enterprises to raise wages through the legislation of wage laws starting from next year.

As two key posts of China's economic growth, Guangdong and Shanghai have adopted practices that have some exemplary meanings. The building of a long-term system to raise wages should be deemed as a crucial reform to effectively stimulate domestic needs, remedy the imbalance of China's economic development and the national income distribution, and boost the sustainable development of the national economy.

In the past year of high-speed economic growth, government taxes and enterprise profits both grew faster than the growth rate of GDP, while the growth rate of workers' wages is lower than that of GDP. We can probably say that the large growth of enterprise profits and financial revenues come true at the expense of the low wage owned by workers.

Undoubtedly, China's economy can't continue to grow in this imbalanced condition. Wages of workers should rise simultaneously with the national economy, which will usher in an era of "wage increase and tax reduction". What Guangdong and Shanghai did is just to answer the call of the central government, which said in the report delivered by President Hu Jintao to the 17th National Congress of the CPC that the government should "gradually raise the proportion of residents' wages in the national income distribution and raise the proportion of labor wages in the primary distribution".

Tax reduction, if it is adopted, will play its role to strengthen both enterprises and residents. The Law on Corporate Income Tax and its related regulations will be enacted from the first day of next year, which has drawn the curtain of the nationwide tax reduction.

As this new law demanded, the corporate tax rate will be lowered down from 33 percent to 25 percent. For those small-scale enterprises, the tax rate is set at only 20 percent, and for hi-tech companies it is only 15 percent.

As a result of all these tax reductions, as is estimated, the national financial revenues may drop by 93 billion yuan in 2008.

As for wage increases, some people still worry that if the government directly interferes in the setting of the workers' wages, the enterprise itself will lose its autonomy. But in fact, the government has various ways to interfere.

For example, it can indirectly increase the workers' wages by strictly implementing the Labor Law and the Labor Contract Law and tightly controlling the overtime work in those enterprises. In addition, the government also can do it by guaranteeing the rights of labor unions.

(China Daily December 1, 2007)