More Disposable Income for Chinese Tax Payers? Devonshire & Douglas Capital Partners Reports

Online, March 7, 2011 (Newswire.com) - Chinese tax payers may be allowed to keep more of their monthly income due to China's attempt to enhance domestic demand. The Chinese government intends a growth rate of 7% over the next five years, a reduction from the 11% of recent years. China is attempting to slow its growth rate after inflation jumped 4.9% in January 2011.

The State Council wishes to raise the minimum threshold on income tax. Though the state council has not yet indicated what the minimum threshold will be raised to, the current level stands at 24,000 Yuan (218 EUR) per month. In addition, China's legislature, The Standing Committee of the People's Congress, will have to sanction any changes prior to commencement.

Beijing is positive in bringing about these changes to find the equilibrium between its domestic demand and its export sector. Forbes has stated that 'China is in the stage of its economic development where it needs, and wants, to increase domestic demand for its products, and move away from dependence on exports. To achieve that goal, wages and salaries must rise to move more of the population into the middle class.' Sceptics are concerned that a higher disposable income for tax payers is liable to put increasing pressure on rising food and property prices. Optimists, however, are positive that a higher disposable income will increase demand to the benefit of the economy.

China has grown rapidly and aided the global economy as Western economies struggle in the wake of the 2008 financial crisis. In the last decade China's economy has overtaken those of Spain, Brazil, Italy, Germany, France, and has finally usurped Japan to become the world's second largest economy. China might be second but it is still a faint second to the world's largest economy, the United States of America, and holds more than $1 trillion in U.S. treasuries. However, despite these factors, its rapid growth rate and its status as the world's leading exporter of goods have proven that China is closing in quickly on the global giant that is the American economy.