By Xu Fang

New Round of Export tax Rebate Increase

 

 

Beijing and Shanghai Step Up Local Infrastructure Investment

China's two major cities Beijing and Shanghai have both unveiled ambitious plans recently for local infrastructure upgrades, as part of the local governments' efforts to bolster investment growth. In Beijing, the municipal government has just approved a 33 billion yuan investment plan for the construction of two new subway lines, which will help to bring the city's total investment in subways to 200 billion yuan by 2015. In Shanghai, local infrastructure investment growth picked up in the second quarter following policy adjustment, soaring 70.6% year-on-year (y/y) and hitting 35.6 billion yuan in the second and third quarters. This amount of investment has far exceeded the 18 billion yuan budget for the infrastructure upgrade in preparation for Shanghai World Expo 2010.

 

Significance: Growth in Beijing and Shanghai has been losing momentum this year, with Beijing's GDP growth coming in at only 9.1% y/y and Shanghai's growth slipping below the national average in the first half for the first time in 16 years. For Beijing, the current priority is to keep up investment growth to prevent a post-Olympic slump, while in Shanghai the government is also looking at infrastructure investment to pick up the slack in exports and real estate investment. Investment in affordable housing, environmental projects and other programmes conducive to long-term sustainable growth and social stability should also be a focus of investment in both cities.
 

Shanghai Unveils New Policy to Stimulate Home Buying

Shanghai municipal government unveiled a batch of new measures recently to lift previous restrictions over second-home purchases, as part of its efforts to bolster the local property market. According to the new policy, second-home buyers will be eligible for the same tax, interest rate and lending policies accorded to first-time home buyers. The lending cap from the housing provident fund, which offers cheaper mortgage loans, for second home buyers will also be lifted from the previous 200,000 yuan to 400,000 yuan. Business tax will be waived for the sale of "ordinary" housing units owned for more than two years, and will be collected based on capital gains-rather than the total value for "ordinary" homes owned for less than two years. The sale of second-hand "non-ordinary" homes-luxury apartments or villas-owned for less than two years will still trigger the payment of business tax based on the full sales price.

 

Significance: This latest measure of the Shanghai government is a follow-up of a recent central-government policy to lower the transaction tax burden for second-home purchasers, with both local and central governments having already unveiled tax relief for first-time home buyers several weeks ago. With the latest tax relief, the government has almost run out of ammunition in terms of tax stimuli and it remains to be seen whether such tax cuts can revive housing sales-which has plunged by more than 20% on the year in major Chinese cities this year.
 

MofCOM Pledges All-Out Effort to Stabilize Export Growth

China will try to stabilize exports as much as it can next year, utilizing a whole range of policies from export tax rebate to credit guarantees for exporting firms, said China's minister of commerce Chen Deming at the annual foreign trade conference of the Ministry of Commerce (MofCOM). The meeting of MofCOM normally sets the tone for China's foreign trade policy for the next year. China's exports declined 2.2% in November, the first monthly decline since 2001. China's total foreign trade is expected to exceed US$2.5 trillion, a rise of 18% from the previous year, said the minister. To support export growth next year, China will continue to extend fiscal and financial support for exporters and will encourage processing trade operations to move to inland China. As demand from advanced economies slackens, the government will also encourage firms to explore new markets in South Asia, the Middle East, Central Asia, and South America, said the minister.

 

Significance: The commerce minister's remarks has marked a strong reaffirmation of the Chinese government's pro-export policy stance, which signals the introduction of more export stimulus measures next year to counter a possible outright export recession in China. Since August this year, the Chinese government has already hiked the export tax rebate rate three times, virtually reversing the rebate cuts introduced in 2007 and 2006. Additionally, it is also widely expected that China will halt the appreciation of the Chinese currency, as export outlook deteriorates and the domestic employment challenge heightens.

 

China Overhauls Import and Export Tax Regime to Aid Economic Recovery

China's tax authority announced on Dec. 17th tax adjustments for a wide spectrum of import and export goods, as part of the government's ongoing efforts to support exports and boost domestic demand for home-made goods. To support the distressed textiles, steel, and fertiliser industries, the government will lower import tariffs on "raw materials that have huge demand in domestic production", and will continue to implement the export tax cut introduced last month for certain steel and fertiliser products. In addition to that, the Chinese government will also add another 36 products to the category of "imported investment goods ineligible for import tax exemption", which mostly include machinery equipment used in agricultural, petrochemical, mining, power generation, ports and other industries that domestic manufacturers are capable of producing. Nevertheless, import duties for certain key components badly needed in China, such as auto manufacturing equipment, plastic processing equipment and dairy production facilities, will be reduced.

 

Significance: This latest adjustment to China's import and export tax regime has followed three consecutive hikes of export tax rebate rates for selected exporting goods since the middle of this year, as well as an export tax rate cut for steel and fertilisers that took effect at the start of this month. Nevertheless, with external demand collapsing, such tax incentives may have very limited role in reviving exports. China's exports plunged into negative territory in November, the first time in seven years, and there is growing likelihood of an even deeper export slump next year as external demand tanks.
 

 

DEADLINE:  Seminar presentation slots are limited to the first ten companies who register, although additional companies are welcome to participate in the mini-trade shows and one-on-one meetings with Chinese attendees. Companies must register before March 1 to have their company information included in the direct mailer promoting the event.  Speaking slots fill quickly, so please register early. 
 
The registration fee covers the costs of seminars, mini-trade shows, and professional translation for company presentations. Hotel and in-country travel reservations will be made for the mission members, but airfare, hotels and meals are not included in the participation fee.  Mission members who require Chinese language interpreters at their displays should expect to pay an additional $75/day.  Once registrations are received, refunds cannot be made.

About the Spring China Mission Cities
 Fuzhou
Population: 6.6 million
·          Fuzhou is the capital and the largest prefecture-level city of Fujianprovince.
·          The city is a center for industrial chemicals and has food-processing, timber-working, engineering, papermaking, printing, and textile industries.
·          In 1999, Fuzhou began to develop creative industries and built the "Fuzhou Software Park," and the government supports the industries via finance, tax and talents. Fuzhou has attracted big companies such as Oracle and CISCO.
 
Kunming
Population: 6 million
·          Capital of Yunnan province, in southwestern China
·          Kunming is the political, economic, communications and cultural center of Yunnan. It is also an important trading center between the far west and central and south China.
·          From 2005 to 2010, the city of Kunming plans to nearly double in size, in terms of both population and area, and it hopes to be one of the trade, transport, financial and cultural centers of Southeast Asia.
 
Chengdu
Population: 11 million
·          Chengdu is the capital of Sichuan province and one of the most important economic centers and transportation and communication hubs in Southwestern China. According to the 2007 Public Appraisal for Best Chinese Cities for Investment, Chengdu was chosen as one of the top ten cities to invest in, out of a total of 280 urban centers.
·          Chengdu was very close to the epicenter of the May 2008, 7.9 magnitude Wenchuan earthquake.  Interest in earthquake resistant building materials is very strong.
·          Chengdu has long been established as a national base for electronic and IT industry. Several key national electronic R&D institutes are located in Chengdu. Chengdu Hi-tech Industrial Development Zone has attracted a variety of multinationals, at least 30 Fortune 500 companies and 12,000 domestic companies.
·          Chengdu is now building itself to be the financial hub for Western People's Republic of China and has successfully attracted major international financial institutions, including Citigroup, HSBC, Standard Chartered Bank, ABN AMRO, and BNP Paribas.

For more information about participating, contact Rose Braden at 503-248-0407 or rbraden@ep.org or see the mission flyer at www.ep.org on the Programs page.