Governments' roles should be changed

The decline of the economy is putting more pressure of many provinces.

According to reports, nearly 40 percent of Chinese provinces failed to collect as much revenue in the first half of the years as they had planned, says an article in 21st Century Business Herald. Excerpts:

In such circumstances, local governments with mounting debts and interest payments will be forced to look for new sources of income. At the same time, they must recognize that imposing heavier taxes on enterprises and taxpayers, will only affect domestic demand, production and consumption.

The situation is reminding governments to rethink their role. They have two options: to continue functioning as  big governments in charge of everything from promoting economic development to providing public services, or to become small governments that concentrate more on providing public services and on administration.

Governments' differing roles in China naturally lead to their having varying blueprints for economic development. The possibility of a vicious economic cycle is the result of these varying roles played by governments, which lower the efficiency of China's economic growth in the long run.

The government needs to restructure its debts through the use of securities and privatization. As long as governments are burdened by heavy debts, they will try to bring in more revenue.

In looking at this situation, authorities should first think about how these debts came about and then try to prevent governments from taking on new debts by changing the roles they play in the economy and society. Otherwise, it is unrealistic to call on governments to cut taxes.