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Import and export tariffs adjust the advantages and disadvantages of China's machinery industry
Abstract Introduction: According to the “2014 Tax Implementation Plan†issued by the Ministry of Finance, China is set to revise its import and export tariffs starting January 1, 2014. This move has significant implications for various sectors, particularly the machinery industry, which must carefully assess the potential benefits and challenges. The plan outlines a broad range of adjustments that could reshape trade dynamics and influence domestic production.
According to the recently released "2014 Tax Implementation Plan" by the Ministry of Finance, China will adjust its import and export tariffs from January 1, 2014. Over 760 imported goods will benefit from a reduced provisional tax rate, which is 60% lower than the Most Favored Nation (MFN) tariff rate. This adjustment has drawn widespread attention from media and industry experts, as it affects a wide array of products, especially in the machinery sector.
The changes cover a diverse range of mechanical products, including complete machines and components such as automobile production line resistors, laser welding robots, tractors with power exceeding 150 horsepower, CNC servo systems for machine tools, wind power equipment parts, controllers, and automatic transmission vehicles. These items are spread across multiple industries, signaling a broader economic strategy.
**Supporting Economic Restructuring**
From a macroeconomic perspective, this tariff adjustment is seen as a positive step toward promoting structural reforms. Bai Jingming, deputy director of the Institute of Fiscal Science, emphasized that compared to previous tariff changes, this downward shift focuses more on fostering high-tech and emerging industries.
For instance, the plan sets a 1% provisional tax rate for aircraft engines, down from 2%, and a 1% rate for turboshaft aero engines, compared to 15%. For diesel engines over 600 horsepower, the provisional rate is 4%, while the MFN rate is 9%. These reductions aim to support industries that rely on imported technology, enabling local manufacturers to access critical components at lower costs.
Additionally, the adjustment includes measures to help reduce excess capacity in certain sectors. For example, coking coal, a key raw material for the steel industry, will be subject to zero tariffs, below the 3% MFN rate. This helps lower production costs for coking companies, which are currently facing declining demand and profitability.
**Potential Challenges for Domestic Companies**
While the tariff cuts offer many benefits, they also present challenges. With over 760 products affected, the impact on the machinery industry is complex. Some products are not yet produced domestically and must be imported, while others face competition from foreign suppliers due to lower tariffs.
For example, automotive production line resistors and laser welding robots, which are already manufactured in China, may see increased pressure from cheaper imports. However, the plan includes safeguards, such as minimum thresholds for battery capacity and energy density in electric vehicle batteries, to prevent unintended consequences.
Moreover, different segments of the machinery industry will experience varying effects. While whole-machine manufacturers may benefit from lower component costs, local part suppliers might face greater market pressures. This dynamic highlights the need for strategic adaptation within the industry.
Despite these challenges, industry experts believe the overall impact will be manageable. Qu Daokui, general manager of Xinsong Robot Automation Co., Ltd., argues that the Chinese machinery market is already highly open, and foreign brands have long been established through local production. Therefore, the scope of the tariff adjustment is limited.
**Long-Term Benefits for Global Expansion**
In the long run, the tariff adjustment is expected to create a more favorable environment for Chinese companies seeking to expand globally. By reducing import duties, the policy encourages the inflow of advanced technologies and components, which can enhance competitiveness in international markets.
Professionals also suggest that the move reflects a broader effort to address trade imbalances and foster a more open economy. As Bai Jingming noted, lowering tariffs can stimulate imports and help manage surplus, ensuring a more balanced trade environment.
Ultimately, while some sectors may face short-term challenges, the long-term goal is to promote sustainable growth and innovation. As the saying goes, a warm shelter may provide comfort, but true strength comes from standing tall in an open market.