China to tighten exports control in 2008

19 December 2007 11:34  [Source: ICIS news]

BEIJING (ICIS news)--China will keep up pressure to reduce its exports in 2008 after cutting subsidies this year and it was considering slapping taxes on exports of energy-intensive and environmentally unfriendly products, industry sources said on Wednesday.

Beijing, which cut export tax rebates for more than 2,000 products in July, could exert additional pressure in 2008 especially on light industrial products which included plastics and electrical appliances, Guo Yongxin, research director at China Light Industries Association, said at a conference.

He estimated that plastic converters would lose $1.2bn in revenue from the eight percentage point subsidy cut.

The rebate cuts have failed to reduce exports, which grew by about 20% to nearly $24bn in November from the same month a year ago, Guo said, adding that the world’s reliance on China as a major purchasing base cushioned the impact.

Buyers found it hard to switch their purchases to other countries and the cuts created an opportunity for converters to raise their prices, he said at the 2007 China Petroleum and Petrochemical Economics conference organised by the China Petroleum and Chemical Industry Association (CPCIA).

Part of the costs was absorbed by middlemen, he added.

Strong demand globally and within China will prepare the industry for further cuts, Guo said, adding that investment in light industrial products would also grow strong at above 20%.

For exports of energy-intensive and environmentally unfriendly products such as aluminium and caustic soda, Beijing was considering introducing taxes after removing the subsidies in July, said Zhang Guobin, secretary general of the China Chlor-Alkali Industry Association.

China was expected to add another 3m tonnes/year each of polyvinyl chloride (PVC) and caustic soda capacity in 2008 which could turn it into a net PVC exporter, he added.

However, producers could also face more trade protection measures after anti-dumping cases in Turkey and India, he added.

India slapped up to 5% taxes in Chinese exports while China has won the case in Turkey, Zhang said.

The industry could also face higher operating costs next year as prices of raw materials such as salt and electricity were rising, he added.

Electricity, which made up more than 50% of chlor-alkali costs, could increase as coal prices were forecast to rise 10%, Zhang said, adding that Beijing was also considering cancelling subsidies.

The central government would soon release standards on emission and safety for products in the chlor-alkali chain in addition to the recent announcement from the country’s top economic planner restricting investment, Zhang said, adding that these would raise entry barriers to the industry..

The standards will also affect existing plants as Beijing would carry out checks to ensure that they were met, he said.

By: Florence Tan
+65 6780 4359

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