Boost for exporters as Beijing eases import curbs on controlled materials
Beijing has relaxed import restrictions on a raft of so-called 'prohibited' commodities in the latest attempt to revive the struggling manufacturing sector.
The Ministry of Commerce said yesterday it had removed 79 types of processing trade commodities from the controlled list, including plants, light industrial products, chemicals, steel and non-ferrous metals.
Such products, usually imported to produce goods for re-export, were originally placed on the list as part of efforts to discourage highly polluting and low-cost manufacturing. Beijing is now loosening those restrictions as a slump in exports threatens growth in the world's third-largest economy.
The new rule means processing trade manufacturers will no longer have to pay value-added taxes and import tariffs on the materials. It also entitles them to value-added tax rebates on the exported goods they produce.
Any processing trade commodity categorised as 'prohibited' attracts import tariffs as well as a non-refundable value-added tax of 17 per cent on export goods containing the material. It is the second adjustment of the 'prohibited category' in five months.
Tax experts said the move would ease the cost burden on thousands of Hong Kong exporters across the border but marked a backdown on a policy on limiting resources-consuming, emission-prone and energy-consuming manufacturing activities.
'The adjustment will give breathing space to exporters and lower their costs,' KPMG tax partner Bolivia Cheung said.
Federation of Hong Kong Industries deputy chairman Stanley Lau Chin-ho welcomed the government's decision but added too many exporters were chasing after fewer orders.
'It is good news and a vote of confidence for exporters,' Mr Lau said. 'But the biggest problem now is insufficient overseas orders.'
The latest adjustment to the 'prohibited' category still leaves the number of products remaining on the list at 1,770.
Beijing has lifted value-added rebates on exports eight times since August last year as the manufacturing sector started to feel the pain of weaker demand in the United States and Europe. Some export products such as textiles and garments have their value-added taxes almost fully refunded now.
Some economists said the latest trade policy adjustment underlined how weak exports were despite recent signs of improvement.
Merrill Lynch economist Lu Ting forecast last month's exports would decline 25 per cent from May last year, compared with a 22.6 per cent drop in April.
Mr Lu expected a gradual improvement in exports despite some green shoots of recovery in developed economies. He said imports would recover sooner, driven by the 4 trillion yuan (HK$4.54 trillion) investment programme and lower commodity prices.