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CCTV Script 05/12/18

— This is the script of CNBC's news report for China's CCTV on December 5, 2018, Wednesday.

Stop improving fuel tax is seen as the first major policy concession by President Macron since he took office in 2017. The commercial damage to the French economy from violent protests cannot be underestimated. Figures show that large-scale disruption caused a very negative impact on business, with sales in the transport and tourism sectors falling by an average of 20 to 30 per cent and economic activity in some regions already in a state of emergency. In particular, the previous weekend, in mid-November, France was in a basket case because of nearly 300, 000 demonstrators. But the deeper economic problems of France may lie behind the violent movement. Let's start by going back to the yellow vest protests. In fact, the decision to raise the fuel tax was not made by Macron, but by the former French President Hollander.

At that time, in order to promote the energy transformation and encourage citizens to buy new energy vehicles, as well as better implement the Paris climate agreement and control carbon dioxide emissions, France planned before Macron took office to continuously increase the tax per liter of fuel until 2022. If the measures go ahead, France is expected to be the country whose gasoline and diesel prices both above 2 euros a liter and the one with the highest fuel price in the European Union in 2022 when Macron ends his first term in office.  However, some analysts believe that there are two major factors behind the outbreak of the "yellow vest" incident in France.

The first special market factor is the rapid rise in international oil prices, boosting gasoline prices. Diesel prices in France have risen about 23% since 2018, while gasoline prices have increased about 15%, according to the data. It left the price-sensitive lower middle class crying foul, and the Macron administration's insistence on raising fuel taxes caused outrage. Second, the sensitivity of the French people to higher taxes is directly related to France's already high taxes.

If you look at the OECD data, France's tax burden in the major developed countries in the west, which is calculated as the percentage of GDP of the country, is the second highest in the OECD, at 45.3 percent, only after Denmark, 11 percentage points above the OECD average.

As a result, raising taxes on already high tax has provoked a backlash. Meanwhile, polls show that Macron's approval rating has fallen 6 percentage points to a new low of 23% in office, and his handling of the protests and attitude is one of the main reasons for his continued decline in public opinion. It comes amid reports that macron may take emergency tax cuts to quell violent protests, but the move could exacerbate France's budget deficit. It is reported that Macron may take emergency tax cuts to quell violent protests, but this move could exacerbate France's budget deficit. France's financial deficit has exceeded the EU's 3% threshold several times in the past few years and it is expected to reach 2.6% of France GDP this year, in 2019, it gonna close to the red line of 3%. So how to stimulate the economy and transform energy without increasing fiscal burden and also keep in line with public opinion? That is a challenge Macron faced.