Re: Is Canada going south? by Greg Neiman Advocate, Sept. 16.
Last May, I returned from a month-long visit to Shanghai, Beijing and other Chinese cities. It was a rewarding experience to see a huge country on the march.
With its Maglev (magnetically levitated) trains running at a breakneck speed of 430 km/h, Shanghai looks like a city of the future. While the U.S. and many western countries are mired in recession, China is growing at an amazing rate of 9.5 per cent. As Financial Times columnist Martin Wolf recently noted: “The West’s reputation for financial and economic competence is in tatters, while that of China has soared.”
I witnessed China’s industrial might while visiting Shanghai’s huge container port — the world’s largest. As far as the eye can see, hulking ships were loading and unloading (mostly loading) containers. It was an intimidating demonstration of China’s industrial clout. China has already overtaken the United States as the world’s greatest trading nation.
In fact, China is now bankrolling America’s trillion-dollar budget deficit.
China is also on the way to passing the United States as the centre for research and development.
While bankrupt America is finding it difficult to provide financial resources needed for research, China is targeting a number of critical areas in science where it intends to be among the world’s leaders. Dr. Jing Naihe, director of Shanghai Institute of Biochemistry and Cell Biology, said that “our top stem cell labs are among the world’s best,” and “in 10 years, we should be at the top.”
While the U.S., facing a financial crunch, is winding down its space program, China is expanding its own. China has already sent astronauts into the space and is now gearing up for robotic and manned missions to the moon and beyond.
Interestingly, while a bankrupt U.S. is cutting taxes, China has raised corporate taxes. As of Dec. 1, 2010, it began to charge foreign firms higher taxes to help finance local city maintenance, construction and schools. Earlier, the government put into place an array of policies, including hefty tax breaks, to attract foreign investment and foreign firms were charged 15 per cent while local businesses paid 33 per cent. Now both will pay at the higher rate.
Despite tax hikes, foreign firms say they would invest more in China.
“At any rate, we cannot resist the temptation of China, because it is such a strong economy with relatively cheaper labour costs and huge markets, while few other countries have such advantages,” said Takeshi Uragami, general manager of Japan’s Panasonic Corporation in China. Uragami said in 2011, his company plans to conduct part of its product design in China.
Prime Minister Stephen Harper, who wants to cut corporate taxes, should realize that with a $400 billion debt and a growing deficit, this is not the time to cut taxes. He should look to booming China, not bankrupt U.S., for inspiration. He should instead raise taxes on rich Canadians to balanced the budget without undermining crumbling public services.
Why the rich? Because they can afford it and they have profited disproportionately during the boom.
Mahmood Elahi
Ottawa