With the country already bracing itself for rising inflation, it was a hard choice for policymakers to hike taxes on resources that might further boost the price of several products.

However, the decision by the Ministry of Finance and the State Administration of Taxation to substantially raise taxes on zinc, lead, copper and tungsten ores from August 1 is a much-needed move. By promoting the more efficient use of the resources, it is of long-term significance to the country's pursuit of sustainable development.

This round of tax hikes will raise the resource taxes on these metals several-fold. Though such resource taxation remains only a tiny part of the huge profits miners can make from exploitation, the hike demonstrates the authorities' resolution to both check resource waste and control damage to the environment.

Unrestrained tapping of resources in recent years has been on the rise as prices for non-ferrous metals have soared by more than 400 percent on futures markets since 2002.

Higher resource taxes will, on one hand, marginally push up the cost of exploitation to dampen miners' enthusiasm. On the other, more importantly, resource taxation can better reflect the true cost of managing the environment. And the taxes raised can be used to fund local efforts to protect the environment.

Admittedly, the mounting inflationary pressure the country faces makes it difficult to introduce higher resource taxes. At the moment, any tax hike risks further inflating the cost and thus the price of resource-intensive products.

Apparently, policymakers who are looking at inflation figures with great caution will not expect any changes at present that will exert upward pressure on the producer price index and hence headline inflation. To prevent the national economy from overheating, the country needs to both slow down economic growth and rein in price inflation.

Yet, the financial and tax authorities' move to raise taxes on resources clearly shows the goal of short-term economic growth should no longer be achieved at the cost of the country's long-term transformation toward an energy-and-resource-saving and environmentally friendly growth model.

(China Daily July 23 2007)