Keeping Track of China's Export Tax Rates and Rebates
One of the secrets to unlocking the total cost savings secrets of global sourcing is to understand where the profit margin from suppliers is coming from (hint: in China, historically it's often come from a VAT rebate that is theoretically payable after to the trading or export company after goods hit the water). But last year, this system was tossed into a state of disarray, at least in some categories, as the government changed its policies in certain industries and categories as to the VAT rebate percentage. Knowing this is China, about the only constant is change, so we might have expected a round of additional changes this year (which Beijing is only so happy as to oblige). But if you don't read Mandarin, don't fear. MFG.com is continuing to translate the list of goods and tax rates over on its site for free.
What explains China's rapidly changing export and sourcing tides? Over on MFGx, AJ Sweatt writes that the "the main push ... is to point out China's on-going shift from low-cost country to higher functioning technology provider. Think Japan in the 1970's or Korea in the 1980's. China's current, similar shift began with its membership in the World Trade Organization in 2001; but it wasn't until June of '07 that changes were made to offset the economic conditions that made China the preeminent choice for companies to use for low-cost manufacturing."
- Jason Busch
What explains China's rapidly changing export and sourcing tides? Over on MFGx, AJ Sweatt writes that the "the main push ... is to point out China's on-going shift from low-cost country to higher functioning technology provider. Think Japan in the 1970's or Korea in the 1980's. China's current, similar shift began with its membership in the World Trade Organization in 2001; but it wasn't until June of '07 that changes were made to offset the economic conditions that made China the preeminent choice for companies to use for low-cost manufacturing."
- Jason Busch
With all due respect to your collegue, I would have to disagree that the primary driver was tomove the economy up the value chain.
Sure, that was a consideration, and it is why we saw nearly every high tech good go to 17%, but as I explained in my post (I was first!), this was a move to slow exports as a whole.
RMB Aside, there are only a few tools that the gov't has to promote/ contract export manufacturing on such a wide level without sinking SOEs and banks... and the VAT is the #1 tool.
to be honest, I am not sure there has been much effect. There has been a lot of talk about people moving out, and orders slowing down, and perhaps we just need to wait a few more months to see it fully flesh out.. but to date, with volume and trade dollars still up, it looks like people were really left without much of a choice and had to bite the bullet.
r
www.allroadsleadtochina.com