Traders hail new export rebate policy
By Zhang Jin (China Daily)
Updated: 2004-06-09 08:44

China's new export tax rebate policy is proving effective in optimizing the nation's export structure and improving the financial profile of its trading firms, according to a senior trade expert.

Many of the nation's trading firms gave a frosty response to the new policy when it was issued at the beginning of this year, believing it would hurt their business.

But Liu Yuqin, a researcher at the Chinese Academy of International Trade and Economic Co-operation (CAITEC), a think-tank of the Ministry of Commerce, told China Daily that these firms are now beginning to appreciate the policy.

She said that "judging from the first four months' figures, the new rebate policy does not hamper exporters' activities as seriously as earlier anticipated."

The policy encourages higher added value exports, Liu said.

It also aims to protect the environment by greatly reducing the export rebate rates of natural resources and highly polluting products, encouraging manufacturers to use more advanced technologies.

"The rebate drop is conducive to improving the export composite in the long term," said Liu.

A further indication that the new policy is proving to be effective can be found in the 33.5 per cent year-on-year increase in the nation's total export value in the first four months of 2004, totalling US$162.7 billion.

The export tax rebate rate was reduced by an average of 3 percentage points from 15.51 per cent, with the central government only paying 75 per cent of the rebates that exceed the 2003 amount, with the remaining 25 per cent being paid by local governments.

The move is designed to ease the central government's financial burden and reduce the pressure for a revaluation of the renminbi.

The central government has expedited the rebate payment process since the new policy came into effect.

Assistant Minister of Commerce Fu Ziying said that the government has now basically paid all of the rebates it owed to trading firms.

The central and local governments paid export tax rebates totalling US$33.5 billion in March alone, a 51.8 per cent year-on-year rise.

Traders have welcomed the prompt process, saying their financial performance has been dramatically improved by the timely payment of rebates.

"We have got all the arrears, which should be paid in 2003," said a manager of Jingtaihang Motorcycle Co, a private export company based in Nanjing, the capital of eastern China's Jiangsu Province.

"Under the new rebate regime, we can get the payment one month after we submit all the required materials," she added.

Rebates were previously in arrears for several months or even years.

Jiangsu Sainty Co, a textile company listed on the Shanghai Stock Exchange, said in April it had received overdue rebates totalling 492 million yuan (US$59.5 million), payments which should have been made either in 2003 or earlier.

Timely payment of rebates helps the company optimize its financial structure, and somewhat offset its losses due to falling rebate rates drops and rising raw material prices.

"Many companies prefer timely rebate payment to a higher rebate rate," Liu said.

But she warned that the policy was far from perfect, pointing out that it required further improvement.

Some local governments, particularly in the relatively underdeveloped regions of western China, cannot afford to pay the rebates to export firms.

This will greatly curb local trading firms' incentives, Liu said.

Some cities complained that they have to pay the rebates of all local exports, although the goods are not necessarily manufactured by local firms.

"This could lead to local protectionism," Liu suggested, but pointed out this has not yet happened.

Her view is echoed by some local officials.

Yu Danhua, an official in Ningbo in East China's Zhejiang Province, said local protectionism could be prevented by the introduction of a system in which those who levy the tax pay the rebate.

"We should watch for a longer time to see if the rebate scheme needs to be revised," Liu said.

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