China’s localities need ‘profound reform’ to draw investment, state newspaper says

A Chinese newspaper has called for localities to alter their strategies to win investment, saying past methods are no longer viable

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China’s localities should limit their reliance on land and tax incentives to bring in new investment, a state media commentary said. Photo: EPA-EFE

Published: 6:30pm, 4 Sep 2024Updated: 1:22pm, 5 Sep 2024

China’s localities should reduce their dependence on land and tax incentives and instead strengthen industrial chains and improve their business environments to attract investment, a state-owned newspaper has urged in a front-page commentary.

Aggressive land deals, tax breaks and subsidies – frequently used to drive investment by local governments in past decades – have led to homogeneous competition and protectionism, both of which are weighing down the growth of the world’s second-largest economy, the Economic Daily warned on Sunday.

Prominently featured in the newspaper affiliated with the State Council, China's cabinet, the piece delivered another high-profile call from Beijing for a change in approach to draw investment and foster a “unified domestic market” to guard against uncertainties.

“China’s vast market, with its enormous scale and growth potential, remains a significant advantage and a solid foundation for navigating changing circumstances,” it said.

“However, persistent issues like local protectionism and market fragmentation continue to hinder high-quality economic development.”

To correct these issues, the traditional model requires “profound reform”, it said, including limits on financial incentives, tax rebates and land grants, as well as eliminating illegal policy concessions.