Global Fastener News

China Export Rebate Change Creates Shanghai Container Gridlock

John Wolz

One consequence of the Chinese government”s decision to slash export tax rebates has been a massive rush to try to get goods out of China by June 30, 2007. China cut the 13% export rebate tax on steel fasteners to 5%, which applies to goods clearing customs starting July 1. The move is likely to increase prices of exported as few factories are expected to absorb the cost increase (see FastenerNews.com June 20, 2007, and FIN, June 13, 2007).

A Fastener & Fixing Europe source in Shanghai reported “the roads leading to Shanghai port have been at a complete standstill.”

A Shanghai freight forwarding agent reckoned it was taking container trucks a minimum of five hours to enter the port from the Shanghai ring road. The port”s container handling facilities have been stretched beyond capacity adding to the delay and truck queues. The forwarding agent told Chinese exporters that it is impossible, in the short term, to confirm exactly when goods will be shipped from Shanghai port.

The rebate cuts have also forced European importers to accede to higher prices in order to be sure outstanding orders are produced and shipped, F&FE editor Phil Matten reported. Concessions on price vary but the picture in Europe suggests most importers are having to make immediate and significant concessions, which implies that the inflationary effect of the rebate cut will be felt in the market quickly.

The tax rebate change is part of the Chinese government’s effort to reduce the export rebate tax on most goods. Overall 2,831 categories of goods, accounting for 37% of Chinese exported goods, are impacted. This includes the elimination of the tax on 553 high energy consuming, high polluting and resource-intensive goods. The rebate was cut on the remaining 2,268 other product types, including shoes, clothing and metal and plastic products.

Reducing domestic subsidies is aimed at easing the record trade imbalance between China and other countries. During the first five months of 2007 Chinese exports rose 23.7% to $801.3 billion, while imports increased 19.1% to US$357.8 million. The trade surplus of $85.7 billion surged 83.1% over the first five months of 2006.
�2007 FastenerNews.com and Fastener & Fixing Europe