Full transcript of policy briefing of the State Council on Feb 27, 2015

Hu Kaihong:

Thank you Mr Liu. Now we start taking questions.

Phoenix TV:

I have two questions, and the first one goes to Mr Wu. We noticed the change from ex-ante (before the event) to ex-post review and approval, but some of the reviews and approvals that used to be done by the government has been quietly transferred to some intermediary services. Nothing can be achieved unless through these organizations. So what do you think of this change? Are there any measures in the reform to address this issue? The second question goes to the Ministry of Finance or the State Administration of Taxation. We noticed the Japanese media’s reports about a Chinese spending spree in Japan during the Spring Festival. It is estimated that around 6 billion yuan was spent in a few days. The tax rate on luxury commodities has been discussed for years among the public. Are there any considerations to cut the tax and keep the purchasing power at home? Thank you.

Wu Zhilun:

When those who are responsible for reviews and approvals find difficulties in judging some technical issues, they turn to intermediary services for help. This is not a problem. What people are discussing are some problems concerning these intermediary services, such as arbitrary charges, delays and low-quality reports issued by them. We once saw a report whose name on the cover page was just changed from A to B intermediary service, without anything changed in the content when it was submitted. We have always paid attention to this issue. How to address it? I’m afraid that it is not feasible to say these intermediary services are not necessary. But how to manage them? Many of them are enterprises and public institutions, and some are societies. Those who pay them should manage them, but today’s problems are that those who pay them for consultation or evaluation are in a difficult position. They also find it difficult to change a service as another one may not work. Such problems do exist. Therefore, the key is not about the intermediary services, but the threads of connection between intermediary services and those who are responsible for reviews and approvals. I think there are two ways to address the problem. The first one is to cut such connections and the second one is to make such connections public. Cutting means these public institutions or enterprises must be independent from related departments. Or, those who are responsible for review and approval pay for the services. Efforts to improve the services are going on and relevant measures will emerge. Thank you.

Shi Yaobin:

The question the reporter just raised is, firstly, a good subject. It shows the rise of Chinese income and purchasing power, so the consumption of tourists going abroad has increased. Of course, some questions followed saying why not keep these consumers at home to boost domestic consumption. I think this question is not so easy. I have not analyzed the product variety of the 6 billion-yuan consumption. It is likely that some of them are luxury products and some of them may be the necessities of life. I heard some Chinese went to Japan to buy products like toilet seats. Toilets seats are not yet enlisted for consumption tax levying.

Now the consumption taxes are levied over a dozen items of certain products. One of them is luxurious products which average income people might not be able to buy. Consumption tax is levied on those high-consumption people to balance the income gap. Another category is those

products with spill-over effects, which might have negative influences over society and the environment. For instance, gasoline, diesel, rubber, firecrackers. For these products which have negative effects over the environment, we need to manage the consumption through tax. Therefore, not all those products bought overseas belong to these categories. Some people hope that the consumption tax or tariffs will be lowered or even suspended, so that all these products can be imported and sold at a domestic price. Will people stop going abroad and buying products overseas then? I don’t think so.

When we go overseas, we go for sightseeing possibly buying some gifts for relatives and friends at home even if they are a little bit expensive. What matters is whether the product is of good quality or not. I don’t think that taxation can turn this around. We, together with the tax authorities, are concerned about the point that you mentioned, and we will continue to track these problems. Hopefully we can bring out polices and measures that go in line with taxation rules while matching consumption habits. Thanks.