Beijing lifts tax rebates, unveils stimulus projects
The mainland will accelerate efforts to shore up its slowing economy by lifting value-added tax rebates on exports and approving 205.9 billion yuan (HK$233.66 billion) in investments in infrastructure projects as part of a 4 trillion yuan stimulus package.
Just three days after unveiling the ambitious plan, Premier Wen Jiabao yesterday disclosed at a State Council meeting that value-added tax rebates on 3,770 types of exports would be raised again on December 1. This follows two increases in the past three months.
The cabinet also approved 188.5 billion yuan of energy projects and 17.4 billion yuan of investments in airport and hydro facilities.
Market watchers said Beijing's quick action on the stimulus package underlined a significant slowdown in the private sector and reflected the central government's worries about the destructive impact of the global financial crisis on its export-oriented economy.
'A key concern of the market is on the implementation of the stimulus package,' JP Morgan economist Wang Qian said. 'The swift revelation of details shows the government is reacting in a timely manner.'
A significant new feature of the tax regime is scrapping export taxes on certain types of steel products, petrochemicals and foodstuff and lowering the export levies on fertiliser.
To breathe life into struggling industries, particularly labour-intensive and smaller enterprises, VAT rebates will be raised on 3,770 types of exports, representing 27.9 per cent of all export goods. The State Council has yet to reveal details of the exports and the new rebate rates.
'It is of course good news,' said Yeung Chi-kong, a vice-president of the Toys Manufacturers' Association of Hong Kong. 'A higher rebate means lower VAT and lower cost.'
VAT rebates on 3,486 types of labour-intensive exports such as toys, furniture, textiles and garments were raised on November 1. The VAT rebate rates on some toys were increased to 14 per cent from 11 per cent, compared with a VAT of 17 per cent on average.
PricewaterhouseCoopers tax partner Alan Wu said that it was a good time to simplify the VAT regime, and the change would be beneficial to companies and domestic demand.
Details of the stimulus package came a day after Customs statistics showed that import growth weakened last month to the lowest level this year.
Imports slowed to a 15.6 per cent growth to US$93.08 billion, below economists' forecast of 17 per cent, while exports were up 19.2 per cent at US$128.32 billion. This left a record-high trade surplus of US$35.24 billion.
Economists expected export growth would continue to sink next year on the back of a bleak global economic outlook.
The State Council approved the 93 billion yuan construction of a gas transmission pipeline from Ningxia in the northwest through 11 regions to Guangzhou and Hong Kong. The pipeline will bring natural gas to Hong Kong for a period of 20 years.
An additional 95.5 billion yuan will be used to build a nuclear power plant in Yangjiang, Guangdong, and expand the nuclear power station at Qinshan in Zhejiang.
A massive hydro-electrical project serving Xinjiang in Guizhou and Jiangxi regions and new airports in Inner Mongolia and Anhui will be built at a cost of 17.4 billion yuan.
Funds are also allocated for the post-earthquake reconstruction in Sichuan.
The mainland targets an economic growth 8 to 9 per cent next year.
Beijing is losing no time in unveiling details of the 4 trillion yuan package
Percentage of export products covered by the value-added tax rebates: 27.9%