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China Briefings

Reports on China issued by Samsung Economic Research Institute

China Business Intelligence No. 5

China Business Intelligence No. 5

Samsung Economic Research Institute Beijing Office

Oct. 27, 2006

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Highlights

I. China Revises Export Tax Rebate Policy

  1. The Ministry of Finance (MOF), along with five other departments, issued a notice effective on September 15 adjusting the export tax including additions on the banned processed trade list.
  2. The government will cancel tax rebates on 255 types of goods, lowering taxes on 1,130 types of goods including products in industries with overcapacity such as steel, cement and textiles.
  3. The taxes are meant to balance China's burgeoning trade surplus and discourage exports in the short-term. Exports from industries with demonstrated overcapacity such as steel, cement and textiles will likely be hit hard. The IT and high-technology sector will benefit including a likely increase of foreign investment.
  4. Over the long term, the change in export taxes is part of a larger goal to upgrade the current structure of the Chinese economy towards higher value-added and technological goods.

II. The TD-SCMA Standard and China's 3G Industry

  1. China's adoption of the TD-SCMA standard for third-generation cellular service presents opportunities and challenges for domestic firms. The standard represents
  2. China's domestic cellular market is experiencing rapid growth, particularly in the area of value-added services. However, domestic firms face difficult choices in balancing the costs needed to build a sustainable 3G network while sustaining current profit streams in 2G services.
  3. The Chinese government should accelerate plans to issue 3G licenses that would allow firms to appropriately plan the use of resources and time to build 3G networks. The government should also provide monetary support to reduce overall costs in adopting the new standard.
  4. Due to existing sectoral restrictions, foreign firms'opportunity to enter the 3G market is through either joint ventures or strategic alliances with domestic Chinese firms.
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