BIZCHINA / Impacts
Tax rebate deadline looms
(xinhua )
Updated: 2007-06-23 16:15
Chinese companies whose export tax rebates will drop or disappear after
July 1 are rushing exports out the doors and worrying about future
industrial strategy.
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"There has been a lot of talk about tax rebate cuts since June, so most
manufacturers are operating at full capacity, hoping to export as much as
possible before the deadline," said Zhang Wei, assistant to the general
manager of Zhejiang Grand Import and Export Co.
Shipment schedules are full right through to July 1, according to a
freight agency in east China's Jiangsu Province, and "freight fees are
rocketing," the 21st Century Business Herald quoted a staffer as saying.
Starting from July, China will cut or eliminate export tax rebates for
2,800-plus commodities -- more than a third of the total number of items
listed on customs tax regulations -- amid efforts to "suppress overheated
export growth and ease frictions between China and its trade partners",
the Ministry of Finance announced on Tuesday.
The last export-tightening move -- which imposed extra export tariffs and
cut import duties as of June 1 -- created an export boom, lifting May's
trade surplus by 22.45 billion U.S. dollars, up 73 percent from the
corresponding period of last year.
However, this time the policy was announced just ten days before it goes
into effect, and manufacturers with full order books have little
possibility of further increasing production.
The textile industry, which contributed 71 percent of China's huge
surplus last year, will suffer a nearly 10 percent drop in profits due to
the tax rebate policy, according to the Oriental Morning Post.
Tax rebates on garments will be cut to 11 percent from 13 percent. Based
on 2006 figures, industrial profits will decline 4.6 percent for each one
percent fall in tax rebates, said Wang Yu, vice-chairman of the China
Chamber of Commerce for Import and Export of Textiles.
"The effect on the steel market will not be so significant," Yangcheng
Evening News quoted Xu Xiangchun, chief information officer of the
Beijing LangeSteel Information Consultation Co. as saying.
"This tax rebate cut is just a supplement to previous tax cuts and only
affects a fairly small range of steel products," Xu said.
"Faced with sagging profit margins, industries should think of ways to
reduce costs and add more value to their products," said Xu Fu, professor
of international economics and trade at Tianjin-based Nankai University.
"Enterprises can increase their domestic sales and some can set up
factories overseas to avoid tax rebate adjustments and trade
protectionism," he said.
In east China's Zhejiang Province, paper mills are using more and more
waste paper instead of pure timber to cut costs, according to Qianjiang
Evening News.
Imports of waste paper surged 40 percent year-on-year to 290 million U.S.
dollars from January to May in Hangzhou Port, the port that handles most
waste paper, according to Hangzhou Customs statistics. Waste paper now
accounts for half the raw material in the province's paper mills.
The new tax rebate system will not only help ease the mounting trade
surplus, but also channel capital investment into 'high value-added and
high tech' industries, said a Ministry of Finance spokesman.
In the long run, this will help the country develop in an economic and
sustainable way, he said.
China reported a trade surplus of 86 billion U.S. dollars in the first
five months, up 83 percent on the corresponding period of last year,
according to Customs statistics.
(For more biz stories, please visit Industry Updates)
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