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Rich Chinese Province to Jump-Start Others : Development: The economy’s bright spot, Guangdong, will pay higher taxes. The money will be used to launch projects in poorer areas.

REUTERS

If Chinese politicians talked like American ones, Premier Li Peng might tell his southern compatriots to read his lips. And the message would probably be: “New taxes are coming.”

The world’s most populous nation is mapping its economic strategy for the next five years, and Beijing is likely to take money from the wealthy southern province of Guangdong to help fund development projects elsewhere, according to government officials and economists.

“We expect a readjustment of the tax system,” said Li Binghui, deputy director of economic restructuring in Guangdong. “The question is how.”

Economists say Beijing will not tamper with the system too much, however, for fear of derailing what’s going on in the south--one of the few bright spots in China’s dim economic picture.

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While the country’s economy struggles to climb out of a slump, most industry in Guangdong is chugging along at a healthy pace. Some economists predict industrial growth of 15% for the province this year, compared to a national target of 6%.

Guangdong absorbs more than 40% of all the foreign investment in China, and accounts for a big chunk of exports.

But in the eyes of Beijing, it has become too rich at the expense of the central government, which crushed a pro-democracy movement last year and has clamped down in the economic arena after more than a decade of encouraging free-market reforms.

The next five-year plan will seek to change the province’s luxurious status, Chinese economists said.

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From the baggy trousers of its pop stars to the Hong Kong-style patter of its television talk shows, Guangdong is ideological light-years away from Beijing. Wages and living standards are far above those in other areas of China.

As part of the economic reforms begun in 1979, China’s provinces were allowed to keep much of the tax money they collected instead of handing it over to Beijing and waiting for some of it to trickle back.

In the heyday of the reform movement spearheaded by Zhao Ziyang, who was deposed as Communist Party chief in June, 1989, provinces like Guangdong became prosperous.

But the hard-line Marxists who seized control last year are trying to tighten the purse strings to finance their own development programs.

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Some economists see a tilt in favor of Shanghai, which has a heavy tax burden and needs money for a major development project in its eastern district of Pudong.

Under China’s quirky tax system, Guangdong--a province of 60 million--will pay about $425 million to the central government this year. Shanghai, a city of 13 million, pays more than five times that.

If Shanghai gets more help from Beijing, Guangdong will have to pay more.

“As long as we can absorb it, we are willing to make our contribution,” Li said.

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Other officials in this provincial capital express the same cautious support for Beijing.

“We support the center,” said Kou Tieying, deputy general manager of the Guangdong International Trust and Investment Corp., a major provincial enterprise.

But he added: “Guangdong’s contribution to the central government is already very big.”

Liao Shuhui, another official working on restructuring the region’s economy, said, “Guangdong is not turning away from the central government. This is a misunderstanding. What Guangdong is doing is all according to the central government’s plans.

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“Some people want to change the tax system immediately. But this is a very sensitive issue,” he continued. “Whatever we do, we cannot return to the old days of handing everything over to the center (the central government).”


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