SINGAPORE - Chinese consumers have been held back for too long, and now must be put front and center in China's growth model, vsaid Anoop Singh, director of the International Monetary Fund's Asia and Pacific Department.
According to an article by Singh published on Thursday's Straits Times, Singapore's leading English newspaper, he said that China has weathered the economic crisis well and the world waits to see if last year's domestic demand growth can be sustained.
Singh said that one key idea to catalyze household consumption in China was to lighten the tax burden on labor.
"Taking into account the personal-income tax and various social contributions, taxation of labor income in China is too high," he said, "China could usefully explore shifting part of the burden from labor toward property, capital gains, and inheritance taxes."
He said China has made important improvements in social-reform program, but noted that "more can be done to speed up the existing reform package, find ways to develop full coverage for catastrophic health events, and develop government-backed financing of tertiary education."
He also stressed the need for improvements in the overall financial system, broadening the range of available savings instruments, and fostering a dynamic service economy.
"If consumption can be successfully and sustainably boosted, I believe that China's development will enter a new era, one in which economic growth continues at a rapid pace, generates higher employment, increases social welfare, places less demand on natural resources, and, ultimately, is of a much higher quality thereby underpinning more balanced global growth," he said.
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