Chapter 7 Section 6 Decryption Made in China is more expensive at home than abroad

The reason why this section is written separately is because this issue is too important, and it is a deformed phenomenon caused by a deformed environment.By dissecting this phenomenon, many problems can surface. And the related issues are all shocking. China's "Twelfth Five-Year Plan" puts consumption in an extremely important position, and proposes to "take the expansion of consumer demand as the strategic focus of expanding domestic demand...to enhance residents' consumption capacity, improve residents' consumption expectations, promote the upgrading of consumption structure, and further Release the consumption potential of urban and rural residents, and gradually make the overall scale of my country's domestic market rank among the top in the world."

While China is doing everything possible to stimulate domestic demand but the effect is not obvious, many Chinese people rush to buy goods when they go abroad, and even empty out some shopping malls. Such consumption power has amazed Western countries.As a result, many well-known stores in France have begun to employ Chinese-speaking clerks, because they have fully realized that the efficiency of shopping malls is closely related to whether they can attract Chinese people. Obviously, this consumption desire does not need to be encouraged.This is the most basic common sense. The reason why China's consumption is sluggish is caused by many reasons.Among them, the most important reason is that the prices are too high. For the same product, not only the price of imported products is much higher than that of foreign countries, but also the price of "Made in China" products is much higher than that of foreign countries.

Most friends who have been shopping abroad have this feeling. When I came to the United States in 2009, I compared the prices of dozens of commodities with those in China, and found that the prices of most commodities in the United States, except books and audio-visual products, were cheaper than those in China after being converted into RMB, and most of them were cheaper. More than 70%.What's even more bizarre is that even "Made in China" products are about half cheaper than domestic ones.It's no wonder why Chinese people spend a lot of money abroad, carrying big and small bags back.

On February 17, 2011, CCTV's "News 1+1" column broadcast an article titled "Go out and buy! "'s special program, reporting on the scenes of Chinese people snapping up overseas. The question is, why are "MADE IN CHINA" (Made in China) products cheaper than domestic ones across the ocean?It must be emphasized that, generally speaking, the quality of "MADE IN CHINA" products sold abroad is better than that of domestic products, and the service is also better. This is a strange but not interesting phenomenon.Behind this economic phenomenon lies many crises—an inevitable reflection of the RMB's internal devaluation and external appreciation reaching a critical point.

Before the product leaves the factory, there is no obvious difference.The difference is after leaving the factory. The first reason is that taxes are too heavy. Gao Peiyong, deputy director of the Institute of Finance and Trade Economics of the Chinese Academy of Social Sciences, once made a comparison. From the perspective of the overall tax burden, China's tax burden is between developed and developing countries, and it is not the highest.The point is that the tax system adds a lot of hidden burdens. Many taxes in China are "invisible", you can't see them, but you can't "escape".For example, tax items such as product tax and business tax that should be borne by enterprises are listed as the cost of products before they leave the factory and are passed on to consumers.Because our shopping receipts usually only have prices, but no tax traces, these "hidden" taxes are usually easily ignored by consumers, but because they are included in the price, the price of the product is naturally high.

Gao Peiyong said that under China's current tax system, more than 70% of tax revenue comes from value-added tax, consumption tax, and business tax.The remaining less than 30% of the tax revenue comes from tax types such as corporate income tax and personal income tax.According to the 2006 data released by the International Monetary Fund (IMF) "Government Finance Statistical Yearbook (2007)": "Calculated in RMB, if the total amount of taxes collected by the above-mentioned countries is 1,000 yuan, excluding the influence of other factors, then , as one of the price components, the tax amounts directly embedded in the selling prices of various commodities are: 700 yuan in China, 168 yuan in the United States, 186 yuan in Japan, and 300 yuan in the 15 EU countries."

In other words, the tax contained in Chinese goods is higher than that of any developed country: 4.17 times that of the United States, 3.76 times that of Japan, and 2.33 times that of the 15 EU countries.As a result, the prices of commodities in China are generally higher than those in foreign countries. Even for products "made in China", the domestic prices are much higher than those in foreign countries. In addition to the amount of personal income tax paid on the monthly salary slip, the daily necessities of life, food, housing and transportation, and every daily consumption of oneself include tax payment.It is understood that the amount of personal income tax in 2010 only accounted for about 7% of China's total tax revenue.The value-added tax and business tax alone accounted for 44.2% of the total tax revenue.Most of the "indirect taxes" borne by individuals are hidden in imperceptible economic behaviors.

It is not surprising that "Made in China" is higher than foreign prices. Jin Dongsheng, deputy director of the Tax Science Research Institute of the State Administration of Taxation, also stated in a speech at the end of 2010 that the proportion of turnover tax in China is relatively high.There are many countries and regions that do not have a definition of "sales tax". In the United States, generally speaking, consumers need to pay consumption tax, but this tax varies from state to state, with a maximum of 10%, and some states even reduce or exempt consumption tax. .In Hong Kong, China, labor and land rent are more expensive than those in the Mainland, but many commodities are cheaper. This is precisely because Hong Kong does not levy value-added tax and business tax.

There are 19 types of taxes in our country, and these taxes will eventually be reflected in commodity prices.Therefore, manufacturing in China is more expensive than overseas, and imported products are much more expensive than overseas.If you buy a Swiss imported watch priced at 2,700 yuan in mainland China, it will include 17% value-added tax of 392 yuan, 30% consumption tax of 623 yuan, urban maintenance and construction tax of 71 yuan, and 11% tariff of 267 yuan. It is 1353 yuan.Tax accounts for more than 50% of the price. Too many checkpoints will inevitably lead to an increase in transportation costs.

Although domestic goods have not traveled across the ocean, they have gone through numerous transportation barriers, and the transportation costs plus various arbitrary fines and fees add up to be more expensive than international transportation routes.A shocking statistic is: 1 kilogram of goods is shipped from Shanghai to New York for only 1.5 yuan, while it costs 6-8 yuan to ship from Shanghai to Guizhou. The high cost of circulation is also an important aspect.To enter supermarkets and shopping malls, products are often faced with high entry fees: shelf fees, monthly rebate fees, advertising fees, promotion fees, annual festival fees, gross profit supplements, barcode fees, terminal fees, etc. Banners, flower baskets, air floats, floor stickers, wall stickers, light boxes, DM special advertisements, personnel management and other expenses.In addition, there are all kinds of hidden operation costs, otherwise, your own products may be placed in extremely remote locations.All-pervasive corruption has increased the operating costs of China's entire economy.Because shopping malls and supermarkets charge far higher fees than foreign counterparts, they obtain higher profits. According to the principle that wool comes from sheep, these are included in the price and passed on to consumers.

Currency is the more important factor that causes "Made in China" to be more expensive at home than abroad.Since the current balance of domestic broad money supply exceeds that of the United States by more than 20%, the amount of currency corresponding to the same commodity in China is far greater than that in the United States. The RMB is not an international currency, and basically all of it is domestic Circulation!In other words, the current exchange rate of the RMB against the US dollar is actually seriously overvalued. When the overvalued RMB is exchanged for relatively undervalued US dollars and other foreign currencies to go shopping, you will feel that the prices are extremely cheap.It is the distortion of the exchange rate that makes it cheaper to exchange RMB into US dollars to buy goods after going abroad.It can be seen that the RMB does not have any room for appreciation.In other words, the appreciation of the renminbi is just a temporary illusion. The price of Chinese goods exported abroad has become cheaper than that at home, which is not unrelated to China's high export tax rebate rate.Of course, due to the heavy tax pressure on China's manufacturing industry (after the subprime mortgage crisis, governments at all levels have further strengthened the tax collection of enterprises in order to implement huge investment plans), many export companies can only rely on export tax rebates to survive . The export tax rebate reduces our fiscal revenue and benefits foreign consumers, or in other words, subsidizes foreign consumers.There is actually a logic implicit in this: in order to subsidize foreign consumers, Chinese consumers need to bear higher taxes and fees.Therefore, the United States has repeatedly cut taxes on its citizens, and it has been generous, while China dare not do so. On December 15, 2010, the tax cut bill reached by U.S. President Obama and Republicans was voted by the U.S. Senate. The bill costs $858 billion and will extend the tax relief measures for millions of Americans and will pass Stimulate consumption to stimulate economic growth in the United States.Chinese consumers can only sigh besides looking greedy. Foreign importers are well aware of China's export tax rebate policy, and they will try to divide the cake of domestic enterprises, so that our enterprises enjoy very limited export tax rebate benefits, but foreigners take the bulk. Under the export tax rebate policy, some domestic enterprises do not hesitate to export goods at prices below cost.It is logical that the price of domestic goods is higher than that of foreign countries. Moreover, since my country has been implementing the export-driven economic growth strategy for many years, whenever an external crisis occurs, China will increase the export tax rebate standard.The export tax rebate rate has increased, and fiscal revenue has decreased.According to the statistics of the State Administration of Taxation, in 2009 the country handled a total of 648.7 billion yuan in export tax rebates.This means that fiscal revenue has been correspondingly reduced by 648.7 billion yuan (which has exceeded the new tax revenue of the year), which has brought greater pressure on the already severe tax revenue.In order to cope with the huge investment plan, our country had to issue more money and credit.More liquidity will inevitably lead to rising domestic prices. In fact, China should provide all enterprises with a fair and just environment, which itself is more important than export tax rebates. "MADE IN CHINA" products are even exported at prices lower than cost, which greatly enhances the competitiveness of our country's products and leads to an increase in trade surplus.Under the current currency issuance system, the trade surplus has led to a passive increase in the domestic base currency.In fact, in recent years, the increase of my country's base currency has been closely related to this.Thus, the logic that inflation is a monetary phenomenon is established.Therefore, the domestic price of "MADE IN CHINA" products is more expensive than that of foreign countries. The strange thing is that the goods that China condenses the blood and sweat of the people, and the dollars exchanged for them flow back to the United States and other developed countries in the form of purchasing US treasury bonds and corporate bonds. What have we got? Foreign merchants generally have a high degree of integrity when dealing with manufacturers. Once a contract is signed, most of them will be strictly implemented, which greatly reduces transaction costs.However, when manufacturers deal with domestic merchants, they often face the risk of defaulting on accounts and delays in recovering them.In order to avoid such losses, most manufacturers will increase prices, and these costs are basically passed on to consumers. Behind the fact that "Made in China" goods are more expensive at home than abroad, is also the blood of the appreciation of the renminbi.This phenomenon of external rise and internal depreciation is continuously exacerbating the systemic risks of the Chinese economy. In particular, it makes the foundation of the currency's existence fragile, and it is extremely prone to sudden crises, especially collapse crises. It should be recognized that when the U.S. debt crisis appears, it must adopt an inherent strategy to fully expose the problems of other economies, especially those that are competitive with it, in order to maintain the relative strength of the U.S. This advantage allows the United States to continue its debt-raising behavior and maintain the normal operation of this powerful country.This means that China, which has become the world's second largest economy, is actually standing under the goals of the United States if its own defects such as excessive currency issuance, accumulation of bubbles, and system loopholes cannot be resolved in a short period of time.