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Amanda Lee

China should “accurately” judge the impact its tech gap with the United States has on international relations and productivity, a former tax official said.
Xu Shanda, a former deputy director of the State Administration of Taxation, also urged Beijing to prioritise boosting consumption and the confidence of the private sector in its latest reform plans.
In an article published by the Beijing-based SSEC Research Institute think tank on Tuesday, Xu said that China should not underestimate the impact of technological progress on international relations.
“The United States is now in an absolute leading position, not a partial lead, but it leads the system,” Xu said, citing the trillion-dollar market capitalisation of US’ most advanced information technology companies.
“This gap is not a gap with the United States alone, but a gap with the developed country system dominated by the United States.”
We must fully evaluate the impact of this gap on productivity and international relations
Xu Shanda
The US has taken technology, led by artificial intelligence, to a new stage, changing the structure of production and improving productivity, said the former official.
“We must fully evaluate the impact of this gap on productivity and international relations,” he added.
“At the same time, we are faced with a major strategic choice: should we establish a completely independent system or join the system of developed countries?”
His comments highlighted concerns over the wider impact on China from a tech war with the US and risks of decoupling from Western markets.
The Biden administration has sought to overcome opposition from allied nations and the tech industry in expanding restrictions aimed at slowing China’s ability to make the most advanced semiconductors, which Washington said could be used to bolster Beijing’s military capacity.
The US-led semiconductor supply chain includes Dutch company ASML, a dominant player in the lithography equipment market, which provides technology crucial for creating the circuitry of chips.




The production of photoresist, specialised chemicals critical for chip making, is also dominated by a few Japanese companies.
To narrow the tech gap with the US, Xu said China’s state sector needs to invest more in advanced technology rather than infrastructure.
Private companies in China have opted to invest abroad to avoid US restrictions on Chinese exports and their weak confidence in investing in their home market is also a problem that needs to be addressed, Xu said.
Xu suggested that some proceeds from China’s treasury bonds could be channelled to private companies to relieve them from tax burdens and to fund innovation.
Xu also urged policymakers to boost consumption by reforming China’s pension scheme, as there are still hundreds of millions of elderly people receiving very little pension, which is not enough to maintain basic living.
China is faced with a rapidly-ageing population, and as of 2023, it had nearly 297 million people aged 60 or above, accounting for 21.1 per cent of the national population.
Better financial support to retirees could help to reduce the need for high amounts of savings, he added.


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Former tax official Xu Shanda also urged Beijing to prioritise boosting consumption and the confidence of China’s private sector


Former tax official Xu Shanda also urged Beijing to prioritise boosting consumption and the confidence of China’s private sector.
