Vicious competition to attract capital must stop

To protect the interests of local people, the central government should forbid vicious competition among development zones to attract foreign investors, urged a signed article in the Workers' Daily. An excerpt follows:

According to the latest report by the National Audit Office, many development zones around the country are offering too much preferential treatment to businesses in an attempt to attract investment.

Among 87 development zones investigated by the audit authorities, 60 sold land at unreasonably low prices and 65 fixed policies to give tax rebates to businesses.

"Such practices have worsened competition for investment among regions and it has also spoilt the financial situation of the development zones themselves," the report said.

By refunding some tax, local governments are trying to make their development zones more attractive for investors. But some have done this with such enthusiasm that they refunded too much tax, regardless of relevant rules and regulations.

Common sense tells us that investors should profit while the local economy develops and the government gets taxes.

But when localities offer preferential treatment beyond reasonable limits, like waiving too much tax and selling land for low prices, it will only harm the local economy and break tax rules.

The reason for local officials carrying on like this is that a rise in foreign investment leads to a steep increase in GDP and export volume. This makes the officials look good and helps their careers.

However, when most of the foreign investors in development zones only establish factories processing imported raw materials and sell the finished products overseas, the local economy does not get much of the profit.

Worse, vicious competition among different development zones forces them to offer more preferential conditions, which only compromises the long-term interests of local people as well as those of the country.

When the localities' efforts to lure investment looks more like a strategy of cutting prices, it is time for the higher authorities to intervene.

There should be stricter supervision and punishments for those who break the rules. The central government should also drive home the concept among officials at all levels that they must attract foreign investment for the benefit of local people.

Source: China Daily