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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 change has significant implications for various industries, especially the machinery sector, which must carefully evaluate both the benefits and challenges that come with this policy shift. The plan includes a wide range of products, many of which are essential for industrial development and technological advancement.
According to the recently released "2014 Tax Implementation Plan" from the Ministry of Finance, China will implement new import and export tariff adjustments beginning January 1, 2014. Over 760 imported goods will be subject to a lower provisional tax rate than the Most Favored Nation (MFN) rate, with some reductions reaching up to 60%. This move has drawn considerable attention from media and industry experts alike.
The adjustment covers a broad spectrum of mechanical equipment, including complete machines and their components. For instance, it includes items such as resistance units for automobile production lines, laser welding robots, tractors with more than 150 horsepower, CNC servo systems for machine tools, wind power generation parts, and automatic transmission components for vehicles. These changes have far-reaching effects on the machinery industry, influencing both domestic producers and foreign suppliers.
**It May Promote Economic Restructuring**
From a macroeconomic perspective, the tariff adjustment signals a strategic effort to support high-tech and emerging industries. Bai Jingming, deputy director of the Institute of Fiscal Science, highlighted that this downward adjustment focuses more on driving economic restructuring compared to previous years. By reducing import tariffs on key technologies and components, the government aims to foster domestic innovation and reduce reliance on foreign imports.
For example, aircraft engines will face a 1% provisional tax rate in 2014, compared to 2% under the MFN rate. Turboshaft aero engines will also see a reduction from 15% to 1%, while diesel engines over 600 horsepower will be taxed at 4% instead of 9%. These measures are designed to help industries access critical technologies more affordably, thus accelerating their development.
Additionally, the adjustment targets industries with excess capacity, aiming to improve efficiency and eliminate outdated production methods. For example, coking coal will now be subject to zero tariffs, below the 3% MFN rate. This is expected to reduce costs for domestic coking companies, helping them remain competitive amid weak demand.
**Some Companies May Face Pressure**
While the tariff adjustment is seen as a positive step, it may also create challenges for certain sectors. With over 760 products affected, the impact on the machinery industry could be mixed. Some products are not produced domestically and require imports, while others are already manufactured locally.
This means that for some companies, lower tariffs could increase competition, making it harder to maintain market share. For example, if Chinese manufacturers of laser welding robots face increased competition from cheaper imported alternatives, they may need to innovate or reduce costs to stay relevant.
However, the Ministry of Finance appears to have considered these dynamics. For instance, certain battery types for electric vehicles have minimum performance thresholds set in the tariff adjustment, ensuring that only high-quality imports benefit from the reduced rates. This suggests a balanced approach aimed at supporting both domestic and international players.
**A Double-Edged Sword**
Overall, the tariff adjustment is viewed as a beneficial move, though not without potential downsides. Qu Daokui, general manager of Xinsong Robot Automation Co., Ltd., believes the impact on the machinery industry will be limited. He argues that the Chinese market is already highly open, with many foreign brands operating locally, which reduces the shock of the tariff changes.
Moreover, he notes that imported robots have long enjoyed zero tariffs, while parts faced higher duties. This makes the adjustment less impactful than it might seem. In the long run, the move is expected to support China's global expansion, encouraging its machinery firms to compete more effectively on the world stage.
In conclusion, while the tariff adjustment may bring some short-term challenges, it represents a strategic step toward economic modernization and global integration. As the industry adapts, the focus should remain on leveraging these changes to drive innovation and growth.