By  on March 5, 2008

BEIJING — Legislation raising taxes on foreign companies and toughening labor standards have increased the costs of doing business in China, but will result in overall benefits by making companies more competitive, a National People's Congress spokesman said Tuesday.

During a news conference a day before the opening of the annual session of the national legislature, spokesman Jiang Enzhu defended measures that took effect Jan. 1, including the national labor contract law and a unified corporate income tax law. The legislation has been criticized by international corporations for raising business expenses. The labor law set up new rights for Chinese workers, and the tax unification measure ended preferential tax rates for global companies that helped make China the world's largest recipient of foreign direct investment.

China's central leadership will not back away from the laws or the spirit behind their passage, Jiang said. Although recent reports indicate some companies might be leaving China as a result of higher costs, Jiang said the central government believes it is on the path to creating a level playing field for foreign and domestic businesses.

Many companies "have not yet gotten used to these new policies and laws," he said.

The new taxation law does allow tax breaks for companies that invest in environmentally friendly production and other types of desirable investment as China's economy develops from one grounded strictly on basic manufacturing, he said.

"We hope that foreign companies will readjust and improve their investment strategies in light of the new laws," Jiang added.

Attracting foreign investment was a major component of China's strategy to develop its economy 30 years ago, and will continue to play a key role as the country's economy matures, he said.

Jiang spoke before the opening of the National People's Congress meeting, when the almost 3,000-member body meets to ratify top-level government appointments and policy decisions that have largely already been made.

This year's congress is so far without watershed legislation, such as the national labor law and land reform, that have marked previous meetings. Instead, much of the discussion is expected to focus on how to control China's rising inflation, preparing Beijing for the 2008 Summer Olympics, streamlining the country's bureaucracy and issues such as food safety.A survey of Internet users in China showed that inflation is a top concern and people want it addressed by the national legislature. Consumer prices have risen at record rates in recent months, with an 11-year monthly high of 7.1 percent in January compared with the same year-ago period. Inflation rose 4.8 percent last year, despite promises from the central leadership to maintain a level of 3 percent or less. Officials have expressed concern that inflation of more than 3 percent could threaten social stability. Prices are increasing faster in rural areas where tensions over lower wages and poor living conditions are heightened.

Housing, health care, corruption and social security also were listed as major issues for those who answered the survey.

Jiang said this session of congress will help to mobilize the country around the Olympics in August. Delegates also will consider some new environmental policies and approve the roster of top-level government appointments that was decided several months ago by Communist Party leadership.

Premier Wen Jiabao will open the two-week session today with a speech expected to address inflation, government reforms and other pressing concerns.

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