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The
Ministry of Commerce announced that, effective from 23 August 2007, manufacturers in China are required to pay a deposit for
1,853 raw materials such as metals, plastics and textiles. The
impact of the move is remarkable as it affect majority of the export
business of Hong Kong.
To
investigate the impact of this new regulation on the members of The
Hong Kong Exporters' Association (HKEA), the HKEA has conducted a
survey among its members. Among the 27 surveyed companies, 22 were
manufacturers and the others were trading companies. The survey
reveals that most of the investigated manufacturers are likely be
affected by the new policy, except four companies which expect that
they will likely be affected by another round of new regulation.
Manufacturers
seeking financial solutions or closing down business
In the survey, more than 80%
of the respondents report that they will be affected by the new
regulations. Among which, more than 90% expect that they will have
to reserve more cash to pay as deposits, which may trigger cash-flow
problems to them. They say the deposit regulation may increase their
pressure on production costs. Meanwhile, 50% expect the new
regulation will increase their administrative work loads.
Since
the deposit amounts to 50 to 100% of the VAT and import tax of the
imported materials, half of the surveyed manufacturers express that
they need to seek for financial solutions or funds to support their
cash flow, while those who have enough capital say they need to
reserve more cash to pay as deposits. Meanwhile, 50% of the surveyed
manufacturers plan to close their operations in China gradually,
among which more than 30% consider relocating their operations to
other manufacturing centers in Southeast Asia, such as Vietnam and
India, and about 30% consider shifting their production bases from
coastal cities in Guangdong Province to other areas in western or
inner part of China.
Effects
spanning the whole manufacturing chain
Although the regulation aims at processing manufacturers, its impact
spans almost the whole manufacturing chain. Therefore, the HKEA also
investigated five trading companies and found that all these
companies are likely be affected by the regulation.
Majority of the surveyed trading companies expect that some
manufacturers may close down business because of the policy, hence
their choice of merchandising will be narrower, while some worry
that manufacturers may shift part of their increased production cost
to them.
In view of the increasing merchandising
cost, many trading companies say they need to increase their budget
for merchandising. Meanwhile, some companies consider shifting their
merchandising from those processing manufacturers to local Chinese
manufacturers or to buy from other manufacturers in Southeast Asia.
Tom Tang, the chairman of the HKEA, said: “Processing
manufacturing is the core business of the export trade of Hong Kong,
we hope that the government could extend the time frame so that
manufacturers have enough time to seek for solutions. In addition,
Hong Kong manufacturers have recently faced many difficulties for
their export business with the increased investigations by overseas
markets, we hope the Chinese and Hong Kong government to adopt an
understanding attitude and offer a helping hand to us
manufacturers.” |
Founded
in 1955, The Hong Kong Exporters’ Association (HKEA) is committed
to safeguarding the interests and progressing the business
opportunities of its member exporters. Currently, the HKEA has more
than 650 members which specializes in diverse areas of export and
re-export trade, as well as manufacturing.
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