Economists called on the government on Tuesday to accelerate economic reforms, including tax and cost cuts to ease the burden on manufacturers, after a Chinese tycoon raised the issue.
Auto glass tycoon Cao Dewang told China Business News that production costs in the United States are lower than those in China. This was echoed by the business community, which is concerned about the Chinese manufacturing sector not only losing out to some Southeast Asian countries, but also to developed economies such as the U.S..
They fear such worries would drive more Chinese manufacturers to move their production sites outside of China.
Qu Tianshi, an economist at ANZ Group, said the government should introduce more favorable policies to facilitate the upgrade of the Chinese manufacturing sector and to boost its overall competitiveness.
"There is room at the central government level to reduce taxes next year, since the balance sheet of the Chinese central government is relatively sound," Qu said.
China's top leaders at the annual Central Economic Work Conference last week decided that boosting the real economy and raising industrial competitiveness will be key priorities of economic policies next year.
"We already sensed the signal from the meeting that the top leadership will continue the corporate cost reduction and improvement of the business environment in the coming year," Qu added.
Cao, chairman of auto glass manufacturer Fuyao Group, said the overall tax cost for manufacturers in China is 35 percent higher than in the U.S..
Cao invested $600 million to build a glass manufacturing plant in the U.S. that began operating in October. The plant has created more than 2,500 jobs in the U.S., according to the company.
The Chinese tycoon said that despite higher labor costs, the profit margin for his company's U.S. plant could be 10 percent higher than what it would be in China.
A senior executive at Fuyao Group who declined to be named told China Daily on Tuesday that the U.S. investment is part of the company's going-global strategy, and Cao's comments did not mean that the company intended to leave the home market.
Nonetheless, economists said that the Chinese manufacturing sector is facing a challenging time as rising labor costs, surging property prices and a heavy tax burden at home have eaten into their profit margins.
Xu Hongcai, an economist at the China Center for International Economic Exchanges, said that China should pay greater attention to outflows of industrial capital and come up with more effective policies to make the domestic market more business-friendly.