By Hasan Muhammad

Editor's Note: The writer is a freelance columnist on international affairs based in Karachi, Pakistan. The article reflects the author's opinions and not necessarily the views of China Economic Net.

In a world where economic turbulence has become the new normal, China’s quiet fiscal revolution stands as a notable exception. The figures released by the State Taxation Administration (STA) in late July cut through the noise of global economic uncertainty, revealing a story of steady governance, targeted relief, and pragmatic policymaking. As the 14th Five-Year Plan (2021–2025) draws to a close, China’s total tax and fee revenue is projected to surpass a staggering 155 trillion yuan (approximately $21.6 trillion), reaffirming the critical role of taxation in statecraft and development.

While many advanced economies remain entangled in ideological debates over tax cuts for the wealthy and widening deficits, China has demonstrated that fiscal policy can be both equitable and efficient. Over 10.5 trillion yuan in tax and fee reductions-including a substantial 9 trillion yuan in export rebates-highlights Beijing’s commitment to economic resilience without undermining its social contract. Rather than serving as a top-down handout to corporations, the tax system has functioned as a redistributive mechanism, with the top 10% of earners contributing 90% of personal income tax revenue from 2021 to 2024. This achievement is particularly remarkable in a global economy increasingly defined by wealth concentration and middle-class erosion.

What makes this development especially significant is not just its scale but its timing. China has taken a long-term approach, placing manufacturing, technological advancement, and income equality at the core of its economic strategy.

The modern services sector-including information technology and software-has seen its share of tax contributions grow by 1.6 percentage points between 2020 and 2024, signaling a deliberate shift toward high-value, innovation-driven growth. Meanwhile, manufacturing, which still accounts for roughly 30% of tax revenue, remains the backbone of the real economy—not as a relic to be outsourced, but as a pillar to be strengthened and upgraded.

At a time when many advanced economies are grappling with the consequences of premature deindustrialization and financial excess, China’s strategy appears both grounded and forward-looking. Foreign-invested enterprises in China have seen a 12.7% increase since 2020, maintaining stable revenue streams. Export tax rebates—growing at an annual rate of 6.6% from 2021 to 2024 and accelerating to 7.1% in the first half of 2025-reflect a policy environment that supports both domestic economic stability and global trade.

These export incentives are not protectionist but integrative, ensuring Chinese goods remain globally competitive while safeguarding domestic employment and supply chains. This approach is particularly relevant as China expands its trade influence through initiatives like the Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative (BRI), both of which require a stable and predictable fiscal framework.

Unlike the broad-based, trickle-down tax models that have dominated Western economies for decades-often resulting in ballooning deficits and rising inequality-China’s relief measures have been precisely targeted. Small and micro-enterprises, exporters, and low-income individuals have been the primary beneficiaries. As a result, over 70% of individuals earning less than 120,000 yuan per year paid little to no tax after deductions. This is not just fiscal policy; it is social policy with real impact.

China’s tax reforms under the 14th Five-Year Plan demonstrate that economic governance need not swing between extremes. Instead, it can be a measured, data-driven process-one that strengthens state capacity without stifling private enterprise and promotes openness without sacrificing national priorities. This approach may not fit neatly into Western economic textbooks, but China is not following a borrowed script. It is writing its own.