Rumor has it that the most probing question China had for the United States
after the Trump election was “Is he really going to cut the corporate tax.”?
China clearly, and rightly, identified the 38% corporate tax rate as the
Achilles heel of the American economy.
The world’s highest corporate tax rate, almost double the average of the
OECD competitor nations when combined with insane healthcare costs which other
countries are not burdened with has made the United States a no-go zone for
setting up business.
Multinationals avoided the country like a plague.
Sure they would have to keep warehouses open there and the HQ staff of American
multi-nationals but over the years they even started to move their HQ’s out
of the country as a paper transaction to avoid tax.
China on the other hand has for 20 years been wooing global multinationals into
its borders not only with a 0% tax scheme for 3 years, then 15% after that, but
getting access to the world’s largest market.
The market doesn’t lie. The RMB is now down for 8 sessions in a row after news
of the tax cut broke.
The government is talking up the RMB through their media outlet. The Global Times
recently quoted Lu Qianjin, a professor of international finance at Shanghai-based
Fudan University,that in the long run, the value of the yuan will be determined by
the development of China’s economy, the balance of international payments and capital
flows. And not worry about the U.S. tax rate. “All the factors affect each other,
and China has enough resources to face the related challenges,” Lu noted.
Now the areas of the country long forgotten will have a chance to rebound. Those
areas are everywhere other than the Federal government, Wall Street, Big Pharma,
and Big Healthcare.
Those burned out plants and factory towns may once again have a chance to be back
in business again.