China tax collection pace slows

China, citing slower economic growth, said tax revenues rose 9.8 percent to $867 billion in the first half of 2012, against 19.8 percent in 2011 first half. The number announced by the Chinese Finance Ministry gives the government less room to stimulate the slowing economy, the official Xinhua news agency said. China's economy, the world's second-largest after the United States, grew 7.6 percent in the second quarter of this year, the slowest expansion in three years. The ministry said growth of all tax collected slowed drastically in the first half, with growth in value-added tax, sales tax, business tax and corporate income tax, respectively declining 11.6, 8.5, 14.8 and 21 percentage points. Taxes from the property sector, traditionally a major source of local government income, also slumped as the government maintained its tight grip over the housing market to curb price hikes. On an optimistic note, a ministry spokesman said growth in tax revenues picked up a bit in May and June after the central bank cut banks' reserve requirement ratio and benchmark interest rates to spur the economy. Separately, the latest assessment by the International Monetary said China's growth rate is set to moderate to around 8 percent this year due to measures by the authorities to cool the economy and the global slowdown. However, Markus Rodlauer, head of the IMF's China team, said with the right policies, and global collaboration, China can meet its immense challenges. "China's economy has now been slowing for six consecutive quarters," he said. "This started early last year when the government deliberately put in place policies to slow the economy, which had been growing very fast. "Now, on top of that, has come the global slowdown -- mainly related to the euro crisis -- that has slowed down the economy more than expected and somewhat more than the authorities had themselves probably intended. So, earlier this year, they switched gears and started to moderately support the economy to ensure a soft landing." Rodlauer said the second quarter growth of 7.6 percent "was slightly better than expected." He said changes needed in China include cutting the savings rate, which is extremely high compared to international levels. He said savings are over 50 percent of income in China, compared to 20 percent to 30 percent in most other countries. "Savings should come down, and people need to spend more on goods for everyday life: consumer goods, furnishing their homes, but also maybe on better health care and other services like travel and insurance," he said. "It's domestic consumption that really will need to provide more of an engine of demand in China going forward." He said a sharp slowdown in investment in China would have a fairly significant impact on growth and exports of goods from countries including Japan, Germany, as well as other Asian countries.