chinaresourcenetwork.com

To jump start exports, China has been increasing the rebates on VAT exports. Basically your supplier pays for the VAT tax on the invoice value when you buy components, but don’t pay tax again when you export - but you still get a rebate on what you paid on the component purchases.

So if you get a higher rebate (the pay out amount is 17%, but the rebate can be less than 17%) then you basically net a higher profit - especially if you don’t pass that on to your customers.

But is this really helping China to increase exports? From what I hear in discussions with factories around China there hasn’t been much improvement. Even factories in core industries (not labor intensive commodity) are now facing shut down - and thats all over the country.

Yet China’s economy is showing some signs of recovery. They have also been pumping stimulus money into infrastructure projects and health care reform. Maybe that’s the fire behind the smoke?

This is the heavy production season in China, pre-Christmas rush that needs to ship out by end of September. We will see what the numbers tell us at the end of this period.

If we had a short stimulus pushed blip on the economic screen - or they are beginning to recover.

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