With the economy continuing its slowdown and the impact of the 4 trillion yuan stimulus package still unclear, many economic institutions predict that China is very likely to issue a second plan in the very near future to encourage domestic consumption.
Analysts from Merrill Lynch, China International Capital Corporation Limited (CICC) and Barclays Capital, among others, agree that what the Chinese government should do in the first place is cut the income tax rate and help its citizens to explore new ways of raising income. They believe that another economic stimulus plan will help China, the world's fourth biggest economy to reverse the downturn as soon as possible.
CICC economist Xing Ziqiang said the new economic stimulus plan is very likely to be issued in early 2009. As a consequence of boosting domestic consumption, China will probably see its fiscal deficit rise substantially, from 180 billion yuan (about US$26 billion) this year to round 900 billion yuan (about US$131 billion) next year, Xing said.
At present, the first measure that China could take is to raise the bar of income tax. Some economists suggested lifting the individual income tax threshold to 3000 yuan (about US$438) per month.
In addition, Xing believes that China will possibly issue consumption vouchers to boost spending as Japan did in 1999.
A Hong Kong-based economist with Barclays Capital said that compared with increasing governmental expending, encouraging citizens to consume is more difficult. It is best that China implement consumption incentive measures as soon as possible, the economist added.
For more details, please read the full story in Chinese. (http://gzdaily.dayoo.com/html/2008-12/22/content_416386.htm)
(China.org.cn December 22, 2008)
