- The Washington Times - Sunday, December 24, 2006

BEIJING (AP) — Parliament yesterday took up measures meant to bring Chinese law into line with a more open, capitalist-style economy by protecting private property and equalizing taxes for foreign and domestic companies.

The proposed property law is the most contentious measure to come before parliament in recent years. Earlier versions prompted an outcry by leftists, who complained it would undermine state control of the economy and worsen the growing gap between an elite who have profited from China’s reforms and the poor majority.

The National People’s Congress began considering a seventh draft that “strikes a balance between private property and state ownership,” said the official Xinhua news agency. It said backers hoped to pass it when the congress holds its next full meeting in March.

The Communist Party amended the constitution in 2004 to enshrine private property rights for the first time since its 1949 revolution. That followed two decades of reform that let hundreds of millions of Chinese lift themselves out of poverty as entrepreneurs started businesses, bought homes and traded stocks.

The debate over legal changes meant to enforce such protections highlights enduring concern about the effect of China’s rapid but uneven growth, which has set off protests over poverty, taxes and seizures of farmland for redevelopment.

The government of President Hu Jintao says it is committed to more reforms while trying to ease social tensions. Beijing has promised to spread prosperity from China’s booming eastern cities to the countryside and urban poor.

The property law, proposed for the first time five years ago, was withdrawn from parliament during its last full meeting in March in an unusual reversal by the government after lawmakers failed to agree on its wording.

Xinhua said opposition faded after a new draft enshrined government ownership “at the heart of the economic system.”

Also yesterday, lawmakers took up a proposed law to equalize tax rates paid by Chinese and foreign companies, many of which qualify for lower taxes because of incentives meant to attract investment.

Finance Minister Jin Renqing told lawmakers “a unified tax code will create a taxation environment that favors fair competition among all ventures registered in China,” Xinhua reported.

Private Chinese businesses complain that breaks granted to foreign companies are hurting domestic entrepreneurs. Pressure rose after Beijing’s entry into the World Trade Organization, which lowered market barriers to foreign competitors.

The proposed law would unify tax rates at 25 percent, Xinhua said.

It said that when various tax breaks are taken into account, the average Chinese company pays taxes at a 24 percent rate, while foreign firms pay 14 percent.

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