A wide-ranging revision on China's tax rebate system was announced in the middle of September affecting around 2,500 export products.
Tax rebate cuts and slashes on some categories mark an end to the "any export era." They also show the Chinese Government's determination to promote energy efficiency, preserve scarce natural resources and encourage traditional industries to upgrade and produce products with higher added-value.
The changes implemented just one month before the 100th session of the Chinaese Export Commodities Fair (CECF), the country's largest of its kind, are expected to affect domestic exporters' performance in the event.
Textile and light industry
Tax rebates on textile products decreased to 11 per cent from 13 per cent. Many textile exporters, who are among the most affected by the rebate changes, have been forced to adjust their overall strategies.
Enterprises' profit in the next year would be further squeezed by the changes in tax rebates, according to Zhang Yufeng, an official with Jiangsu Sohu International Group.
He said the company had set up an office that specializes in knowledge of the changes but measures were not yet finalized.
The average profit margin of small- and medium-sized textile export enterprises was merely 5 per cent.
Lu Gangsheng with Shanghai Knitting Group said the company would try to reduce prices of raw materials.
"At the coming CECF, we have to try to increase the prices," he said.
However, insiders agreed that the changes in the tax rebate system would help restructure China's domestic textile industry.
The long-awaited move is aimed at cutting China's mounting foreign trade surplus and improving its industrial structure.
Tax rebates on exports and the foreign exchange rate are widely viewed as two policy measures readily available for the government to tackle the ballooning trade surplus.
Conditions are similar for the light industrial product exporters.
"It is hard to increase the prices for the contracted deals," said Li Zhongjian, general manager with Oriental Light Industrial Co, 90 per cent of whose products are export-oriented. "We have to face increasing material costs."
Li said the company would develop more products with high added-value in a bid to increase export prices.
For example, the company has developed five patents on cigarette lighters to deal with the technology barriers set by the European Union.
Metals, minerals and chemicals
Export rebate rates on products were reduced to 8 per cent from 13 per cent, while rebates on building stones were cancelled, casting a shadow on domestic construction material exporters.
It is estimated that the 5-percentage-points tax rebate cut, together with the revaluation of the yuan and price increases in energy and raw materials, will increase China makers' price costs by 12 per cent in the next year.
Officials with the Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters, however, are optimistic with Chinese enterprises' ability to deal with the problems.
They believe enterprises should bring to the coming CECF some innovative products and further improve after-sales services in a bid to cushion the rising costs. But some enterprises worry whether customers will accept any price increases.
Processing trade of stone products has been prohibited besides the tax rebate slash, so it is expected to be a hard time for the stone export sector.
The coastal Fujian and Shandong provinces and North China's Hebei Province are the major building stone manufacturing centres in the country. Fujian accounts for nearly half of China's stone product exports.
Machinery and IT products
High-tech product exporters are encouraged by the policy as tax rebates on some machinery and IT products has increased to 17 per cent from 13 per cent.
Wei Zili, spokesperson with Prima, said the adjustment helped sharpen the company's competitive edge in the international arena.
Flat-panel television sets now account for over half of the company's total export value.
The new policy is expected to increase their profits in this area.
Wei said the company had to decline some overseas contracts due to the low export tax rebate in the past.
"Thanks to the increased rebate rates, we will be able to retain our old customers and develop new ones," he said.
Prima has attended every session of the CECF since the company began to tap into the international market.
"It is a good bridge to overseas markets," Wei said. "We showcase our image and promote new products at the fair."
Among the products Prima is scheduled to bring to the CECF this autumn, 70 per cent will be newly-developed products. "It is a key step to increase the company's market share in the world."
Pharmaceutical products
The government will increase the tax rebate on biological pharmaceutical products to 17 per cent from 13 per cent. The move is applauded by domestic pharmaceutical makers.
"It will allow us to do more exports by ourselves," said Jiang Yang, general manager with NCPC GeneTech Biotechnology Co.
The company is well-known in the industry for manufacturing and exports of biological pharmaceuticals like EPO. Restricted by experiences in foreign trade and costs, its exports were largely conducted by professional trading companies.
Jiang said in recent years their international EPO market share was squeezed by some South Korean rivals, who sold at irrationally low prices.
"The increased tax rebates will help domestic pharmacies increase their presence in the international market," he said.
