A HONG KONG business delegation has returned from a Beijing meeting with Chinese Vice-Premier Zhu Rongji with news about a duty security system for imported raw material. Foreign investors will have to sign a guaranteed contract issued by the Bank of China agreeing to pay the value of imported raw material if they failed to re-export them, but there would be no cash charge. Mr Zhu unveiled new investment incentives to counter the losses incurred by foreign investors because of the scrapping of tax exemptions on machinery imports. The new policies included cutting import duties to an average of 15 per cent over two years, granting preferential treatment to high-tech imports and allowing free currency exchange. The Hong Kong delegation, including the Federation of Hong Kong Industries, the Chinese Manufacturers' Association of Hong Kong, the Hong Kong Exporters' Association, the Hong Kong Textile Council, the Hong Kong Electronics Association and the Hong Kong General Chamber of Commerce, met the vice-premier and other officials in Beijing on Monday. Mr Zhu told the delegation that China would not impose a cash security deposit charge on foreign-owned assembling and processing enterprises, dispelling rumours that investors would be required to pay a deposit equivalent to 30 per cent of the value of imported raw material. He said the new system demanded the signing of guarantee contracts. The head of the delegation, Henry Tang, who is also Federation of Hong Kong Industries chairman, said: 'A 100 yuan [about HK$93] fee will be charged for each contract regardless of the value of the raw material imported and investors need not honour the agreement unless they fail to export the processed goods.' The bank will open an account with a balance equal to the value of the imported raw material and the account will be cancelled when the manufacturer presents proof of export. The delegation was told the new system was designed to combat tax evasion and illegal sales of imported raw material on the domestic market. The system would be on trial in Dongguan, Suzhou and Ningbo where there was significant Hong Kong investment, according to Mr Tang. He said the system would be introduced within one or two days. Mr Zhu was reported as saying tax exemptions enjoyed by foreign investors when importing machinery and equipment for Chinese plants would be abolished but a cut-off date was not fixed. China had lost 120 billion yuan in tax income under the exemption scheme, the delegation was told.