FocusChina new tax rule to hit polymers imports

25 July 2007 08:23  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS news)--China’s polymers imports demand is expected to weaken after the government imposed a new regulation, requiring export-oriented processors to pay deposits when importing resins, industry sources said on Wednesday.

The move targeted at coastal export-oriented processors, who were exempted from paying import duties and value-added taxes when buying raw materials from overseas, might also prompt them to move their factories inland, David Jiang, a consultant from Beijing-based Sinodata Consulting said.

China’s Ministry of Commerce (MoC) announced late on Tuesday that these processors will have to pay deposits equivalent to 50-100% of the resins import and value-added taxes (VAT), with effect from 23 August.

Previously, deposits were required from processors in the C category, but this has been extended to those in the A and the B groups located along the coast, it added.

These will include processors in Beijing, Tianjin, Shanghai cities and provinces such as Liaoning, Hebei, Shandong, Jiangsu, Zhejiang, Fujian and Guangdong, the MoC said.

Deposits and interests, to be paid when converters apply for the re-exporting document which exempts them from paying import duties and VAT, will be refunded once the finished goods were exported, it added.

"The deposit is targeted at export-oriented processors who generally benefit from lower Chinese taxes. For nylon chip buyers, it mainly affects their cash flow as they will need more capital for the deposit, a nylon chip seller said.

"This is likely to discourage them from exporting their products on the cheap and add to the country’s trade surplus."

The deposits will affect the cash flow of export oriented processors who might cut their production as costs increased, Jiang said, adding that it could also affect the demand of imported resins and other chemical raw materials.

A Shanghai-based plastics converter said in Mandarin: "We expect the deposit to be refunded in four to five months’ time and that will tighten our liquidity."

He added that it will have to slow down its imports.

"China’s polymers imports demand will be affected to a certain extent in the next few months, as many converters, particularly the small and medium-sized manufacturers, will have difficulties extending their credits in the short-term," an Asian polypropylene (PP) producer said in Mandarin.

A Shanghai-based trader said the move will also weaken polyvinyl chloride (PVC) demand of downstream converters who use imported resins.

The new regulation has also dampened activities in the styrenic resins markets as it will curb smaller converters’ appetite to import, a Hong Kong trader said.

"The policy will drive some converters to relocate to other countries in Asia, particularly Vietnam, where production costs and investment incentives are better," the PP producer said.

However, a major nylon chip producer in Taiwan does not expect the measure to dampen sales into China.

"There remain a good number of established nylon chip end-users which are not export-oriented processors," he said.

Rena Gu, Clive Ong, Joie Xu, Carol Li, Wan Hsin Hun and Florence Tan contributed to this article.

By: Chow Bee Lin
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly