The World’s Fastest Growing Economy Getting Smarter
Thursday, January 25th, 2007
By Michael Lombardi, MBA for Profit Confidential
How smart can the Chinese get?
China’s economic growth has been steady at about 10% per annum over the past four years — a growth rate other countries could only dream of.
It’s been called the fastest growing economy in the world. Countless articles and books have been written about how the Chinese economy will overtake the U.S. economy, in terms of size, this century. Will it happen? I don’t know. But what I can tell you is that the Chinese have been very smart with their growth plan.
To lure foreign investors to the country, back in the 1980s, China introduced lower tax rates for foreign investors with direct investment in China. Foreign companies were offered tax rates well below 20% in development zones of China in an effort to open plants and create jobs for Chinese citizens.
With foreign companies dumping an estimated $70 billion in investment into China in 2006, China has realized that it no longer needs cheap taxes to woo foreigners, and it is about to end its tax breaks for foreign companies.
Lure the multinationals in with cheap labor and cheap tax rates — then take them away. Smart. Very smart. Pressure on cheap labor prices in China continues to build. Now, tax rates are going up for foreign based companies.
Personally, I believe China’s motive in raising the tax rates of foreign companies in China is not just an effort to curb growth. I believe that Beijing could be saying “enough with foreigners opening up plants here… we’ve got some of our own domestic companies growing quite well… why not groom our own?”
I doubt the higher tax rates will deter foreign companies from setting up in China because the cheap labor is just too tempting. But it will mean even more cash for the Chinese government’s social programs. China: One smart growing economy.
NEWSFLASH — Merrill Lynch has increased the pay of its Chairman and CEO to $48 million. The pay-outs at the big Wall Street firms just continue to increase. A sign of the times, or simple excessiveness? History will tell. The increase Merrill Lynch gave Stanley O’Neal over his last year’s pay was 30% — a far cry from the gains Wall Street retail investors have made since the tech bubble of 1999.
Next Post: Airline Industry Gets a Boost from the Break in Oil PricesPrevious Post: Poor Excuses for the Finance Minister’s Actions
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
