China Exporters Hit by Policy Changes

BEIJING, Jun. 25 -- Exports of products containing tin from China will be subject to a range of new factors from the second half of this year. The scrapping of export rebates on tin semis will not have much market impact, but currency appreciation and rapidly rising labour costs could have a significant long-term impact on exports of tin-containing manufactured products such as electronics goods.

China will scrap its 5% export tax rebates on some copper, lead, nickel and tin semi-fabricated products starting in mid-July. The rebates, introduced last year to help exporters struggling with a downturn in demand, will be cancelled from July 15, the Ministry of Finance said. According to American Metal Market, the move is intended to avert any trade friction and is in line with the Chinese central government's attempts to streamline some key energy-intensive industries. The cancellation of rebates, applied to hundreds of other products outside the base metals sector, also reflects the government's attempts to reorient the economy away from a reliance on exports. However Chinese exports of tin products in 2009 amounted to only 5,284 tonnes in a 130,000 tpy market.

The recent decision to allow the yuan to move more freely relative to the US dollar, expected to result in a steady appreciation over time, could boost China's imports of tin metal but will have an adverse impact on export competitiveness. This may compound the structural problems which Chinese electronic enterprises are facing, notably rapidly rising labour costs. Foxconn, the world's largest contract electronics manufacturer, has recently been in the spotlight as a spate of worker suicides at its Shenzhen has forced it to review salaries and working conditions. The local government has increased the minimum wage standard and required enterprises to supply more insurance for their workforces. Cost inflation is a big pressure for most electronic enterprises, especially for the low-profit OEM manufacturers. This will result in the re-location of factories either to cheaper regions in China or to lower cost Asian countries such as Vietnam or India.