Renewal Industry Faces Another Upheaval Corporate Business Models May Undergo a Complete Overhaul [SMM Analysis]

SMM August 17 News:

       Recently, a notice (No. 770) issued by the National Development and Reform Commission (NDRC) in conjunction with four other ministries has sparked widespread discussion in the market. The notice primarily targets irregular investment promotion activities across different regions, requiring local governments to implement relevant regulations within a set timeframe. It also stipulates that any existing policies related to investment promotion, such as fiscal rebates and subsidies, which violate the central party and State Council's requirements for standardizing investment promotion, must be cleared and abolished by the end of August 2025. The secondary copper industry is currently grappling with tax rebate and "reverse invoicing" issues. Based on current market feedback, some areas in Anhui and Jiangxi provinces have started to implement this notice, but the impact remains limited. According to Notice No. 764 issued by the NDRC and other departments in Jiangsu Province, they will enforce national and provincial work requirements, accurately grasp the principles of the relevant work, and have already had a substantive impact on some enterprises in the region. Additionally, certain areas in Chongqing are also implementing and enforcing the work based on the NDRC's Notice No. 770. This implementation is currently regional, and it is recommended that enterprises closely monitor the scope of policy enforcement and adjust their business models as soon as possible.

       Based on the content of this notice, enterprises in the secondary copper industry should pay attention to the following:

1. According to enterprise feedback, only a few markets will start piloting from next month, and tax rebates or preferential policies related to investment promotion at the district and county levels may be suspended;

2. The notice mentions that the policy transition period until May 2027 applies only to compliant investment promotion projects signed before May 2024. Since most enterprises in the secondary copper industry operate on an annual contract basis, this will have varying impacts on many enterprises. If there are conflicts involving the legitimate interests of enterprises, local authorities need to negotiate with the enterprises and provide fair and reasonable compensation.

3. Standardizing investment promotion work aims to eliminate malicious competition in various markets and further promote a unified market. Some enterprises in the secondary copper industry chain stated that if the cancellation of "tax rebates" can be fully implemented, it will undoubtedly create a healthier and fairer competitive environment for all markets. However, in the short term, it will significantly impact production. Enterprises estimate that after the cancellation of "tax rebates," they can only bear an increase of up to 5% in raw material procurement costs. Beyond this range, enterprises may be forced to cut production or even halt operations. To survive, given the currently weak end-user consumption market, enterprises can only try to lower raw material procurement prices upstream.

       In summary, the implementation of standardized investment promotion work promotes healthy and fair market competition and eliminates the issue of tax havens.