8/14/2019 China Market Intelligence: Mar-Apr 2009, China Business Review

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China Market Intelligence

and policies in the plans include relieving the tax burden onenterprises, supporting financial credit development,launching enterprise-technology-reform projects, encouragingmergers and acquisitions to improve risk forbearance andglobal competitiveness, fully developing rural markets,expanding exports, and storing energy.

As CBRwent to press, China had approved in principleplans for the industries listed above; a few details follow.The PRC government also issued plans to invest in railconstruction and energy and environment projects.s Steel and autos The State Councils plans for Chinas

steel and auto industries aim to eliminate obsoletecapacity, accelerate innovation, and cut export tariffs.Some analysts note that the auto plan may favor light,efficient engines.s Shipbuilding The plan to stimulate the shipbuildingindustry urges banks to boost finance for vessel exports,extends financial support for domestic buyers ofoceangoing ships to 2012, encourages the replacement ofoutdated ships, suspends new shipyard construction, andsupports technological renovation and industrial updates.s Textiles The State Council in early February announcedincreases in the export VAT rebate rate for textile andgarment exports from 14 percent to 15 percent. Actual

implementation dates remain unclear, but moves to boosttextile exports and market share could meet oppositionabroad.sMachinery manufacturing The State Council alsoapproved a plan that grants heavy machinery manufacturerstax incentives, especially when they engage in research anddevelopment.s Electronics and IT According to PRC press reports,the electronics and IT industry plan, approved in mid-February, states that China will invest roughly 600billion ($87.7 billion) over three years to promote third-generation communication services, digital TVs, and next-generation Internet.

s Light industry The State Councils light industry plancalls for increases in export tax rebates and lending andother financial support for small and medium-sized light-industrial companies. It also aims to speed technologyupgrades in certain sectors to improve energy conservationand environmental protection.

s Petrochemical industry Press reports indicate that thegovernment will likely invest 100 billion ($14.6 billion)in petroleum-related project upgrades in 2009 and 2010and 400 billion ($58.5 billion) for construction of 20new, large petrochemical projects; these amounts wereunconfirmed as CBRwent to press.

Foreign company opportunitiesNDRC and MOFCOM officials in late January assured

USCBC that foreign companies are welcome to participatein projects associated with the stimulus but provided no

specifics. Companies should be aware that the majority ofproject contracts and licenses will be awarded at theprovincial and municipal level and that opportunities varygreatly by sector. US companies that specialize inengineering, design, construction, energy, and otherinfrastructure services could see the best opportunities, asmuch of the total stimulus package targets infrastructure.National officials growing concern about severe watershortages in and around Beijing has increased thelikelihood that environmental projects in Chinas northparticularly water treatment plants and irrigationprojectswill be a particularly high priority in the firsthalf of 2009.

Though China plans to aid various ailing industries withincreased funding for projects, the State Council has madeit clear that the country could also use the economic crisisas an opportunity to encourage mergers and acquisitionsamong domestic enterprises to create more competitivenational champions. Foreign companies involved in orcompeting with sensitive, nationally controlled sectors,such as auto manufacturing, shipbuilding, or textiles,should not be surprised to see more domestic preference in2009.

USCBC expects stimulus-related announcements to bereleased at a steady pace and with varying levels of detail.The March National Peoples Congress will bring

additional focus to Chinas economic recovery plans.

This article is adapted from reports that first appeared inChina MarketIntelligence, the US-China Business Councils (USCBC) members-onlynewsletter. To find out more about USCBC member company benefits, seewww.uschina.org/benefits.html.

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