Chinese tax rebates

21 June 2009

22 June 2009 | Jake Kanter

Buyers must pressure Chinese suppliers to drop their prices after the country raised export tax rebates this month, experts have advised.

China's Ministry of Finance announced it would raise concessions by up to 17 per cent on more than 2,600 items, including agricultural equipment, plastics and glass.

Ministry official Liu Shangxi told state media service Xinhua the measures would help "shore up" exports following a slump in activity during the economic downturn.

China sourcing experts said it was good news for buyers because it could lead to cheaper deals, but warned the rebates would not be passed on voluntarily.

Bradley Feuling, chief executive of supply chain consultancy Kong and Allan, said: "If suppliers are not asked to pass on the kickbacks, they won't." He added that buyers could capitalise if they have "rolling contracts" in place, but it would be difficult to make changes to longer-term deals.

China Export Finance CEO, Karl Alomar, told SM: "Discounts won't be automatic, sellers will try to keep the margins wherever possible to replenish working capital reserves. Suppliers will claim rebates are not recognised until three to six months after payment so they do not immediately reap any benefits."

He said the rebates were designed to make China more competitive than its nearest Asian rivals. "If the Chinese government feels the rebates are beneficial and further cuts would help, it will make more changes."

SMjun2009

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