China's paper and board product exports may drop dramatically in
the second half of this year because of the new export tax rebate
adjustment, starting from July 1.
A number of paper makers are expected to shift to other
businesses or even face bankruptcy since the average profitability
of the industry will drop drastically, according to a report from
the National Development and Reform Commission.
The report predicts the export profitability of the sector is
likely to drop by 5 to 7 percentage points.
The Ministry of Finance and the State Administration of Taxation
have announced a cut in the export value-added tax rebate on paper
products from 13 to 5 percent starting from July.
To reduce the impact of the rebate changes, enterprises, based
on the market buzz on the coming adjustment, have all tried to
export as much as possible in the first half.
According to statistics from the General Administration of
Customs, in the first four months of the year, exports of paper and
board products grew by 36.2 percent year-on-year. In February, the
export volume was up 54.2 percent over the same period last
year.
The adjustment will have a wide influence on the paper industry.
Exports of China's paper and board industry stood at $4.58 billion
last year, $1.70 billion of which would be affected by the new
rebate policy, or about 37 percent of the total.
Indonesian firm APP said the adjustment will directly result in
a 24 per cent reduction in export profit. "Our paper converting
business, including paper bags and notebooks, will be impacted," an
APP official, who did not want to be named, told China Daily.
He pointed out that export value-added tax rebate is a standard
practice worldwide in the paper industry and that some
international rivals even enjoy 100 percent rebate.
APP's production and converting capacity stands at 6 million
tons a year, making it the leader in the domestic industry.
Dongguan-based Hang Luck Paper Products Factory says its costs
have gone up by 25 percent as a result of the new policy, along
with the rise in costs of imported raw material.
Fu Zhenguang, managing director of the factory, said the firm
had to terminate its plans to expand the existing factory,
according to a report from www.paper.com.cn, a leading paper
industry portal.
East China's Zhejiang Province is the main paper production
base. An official with Jiaxing Seagull Paper Products Co Ltd said
the new policy will result in a reduction of $800,000 in profit for
the firm annually.
"We can't change quotations to our long-term clients. The
company will have to bear the loss," an official surnamed Shen was
quoted by Zhejiang-based Qianjiang Evening News as saying.
But rather than complaining about the new policy, enterprises
should enhance their competitive edge by improving the quality and
cut production costs, says Zhao Wei, secretary-general of China
Paper Association.
He said the paper industry has a long production chain, such as
raw material providers, chemical industry, logistics sector and
clients. For individual enterprises, the only thing they can do is
to increase their competitiveness.
Zhao pointed out that paper exporters will have a good market
potential as long as they focus on adjusting product portfolio and
improving the operational method and the logistics system.
"Competing on price does not work in the industry any more," he
said.
Zhao said paper-making is closely linked to the country's
overall economic performance.
The US paper industry leads the world, with that of China taking
the second position.
(China Daily August 7, 2007)
