taxes on luxuries in China

Ask an Economist
Question: 

The Chinese government recently added a tax on imported luxury cars. My question is why "extravagant spending by the elite is politically dangerous at a time of slowing economic growth"?

Answer: 

Although China has had a spectacular economic growth in the last three decades, income/wealth inequality has been rising over time. It would not be a big problem as long as the high growth of economy can be sustained. This is because most people will experience or can hope for a rising living standard associated with high economic growth. However, when economy growth slows down, this expectation collapses. As a result, people will become more and more unsatisfied with inequality, which causes political instability. 

Category: 
Last updated on May 12, 2017