China to axe anti-import subsidy
Shares of Xinjiang Goldwind Science & Technology fell yesterday after a United States report said China has agreed to stop subsidising wind power companies that use parts made on the mainland instead of imports.
Details of the agreement would be unveiled by US Trade Representative Ron Kirk in Washington last night, USA Today reported. The paper quoted Kirk as saying: 'This outcome helps ensure fairness for American clean technology companies and workers.'
News of the mainland's agreement was confirmed by a US trade spokeswoman in Washington, according to Reuters.
However, an official at the public relations office at Beijing's Ministry of Commerce yesterday was unable to confirm the report.
The US trade representative said subsidy programmes were subject to World Trade Organisation rules. The grants under the Special Fund for Wind Power Manufacturing ranged from US$6.7 million to US$22.5 million and 'seem to be contingent on' wind-power equipment makers using domestically made parts, according to the US trade office.
It estimated that several hundred million US dollars of grants had been provided since the programme started in 2008.
According to the listing prospectus of Goldwind, the special funds were introduced by the Ministry of Finance in August 2008 to support mainland-controlled wind-power gear and parts makers.
Pierre Lau, Citi's head of Asia utilities research, noted that the subsidies applied to the first 50 units of new products, and could be equally shared between turbine makers and their parts suppliers.
To qualify, the new products must have patents, be capable of generating at least 1.5 megawatts a year and source its major components from mainland manufacturers. They must also be at least 0.5 megawatts more powerful than previous products.
Lau said the deal could cut Goldwind's profits this year by 2 per cent. Goldwind declined to comment.
Shares of Goldwind ended down 2.1 per cent at HK$10.46.