The Ministry of Finance and State Adminstration of Taxation has introduced new Chinese export VAT refund rates. The new export VAT refund rates reduction will come into effect on July 1, 2007.  

The changes of the rates reduction can be categorised as follows:

In category A) export VAT refund rates  changes to withdrawal of export VAT refund entitlement, in category B)  as low as 5% and in category C) exemption .

It’s obvious that the changed export VAT refund policy will apply pressure on the cost competitiveness of the Chinese producers, who might have to absorb a part of the additional costs. Further pressure on the producers is coming from the re-evaluation of the RMB versus the USD.

We, however, believe that the Chinese producers thanks to modern and efficient production facilities will be able to maintain their cost competitiveness in the medium term, despite temporary challenges. Following substantial Chinese investments in world scale units we believe that the Chinese will remain competitive in many product segments.