Friends who are engaged in foreign trade, pay attention!
Starting from April 1st, a policy adjustment that is closely related to every export order and every profit will most likely be implemented – the state’s subsidy support for foreign trade exports may have to be gradually “weaned”.
This matter seems to be a major industry event, but in fact it involves the pocketbooks of tens of millions of foreign trade bosses and factory workers.
Below, let us learn more about it together.
1. How to adjust the policy?
The two types of industries are the first to bear the brunt, and profits have shrunk directly
The core policy change this time is that the export tax rebates for some products may be reduced or even eliminated directly. This means that the state will no longer provide additional money for these export commodities, and companies will have to rely on their own strength to compete in the market in the future.
Once this adjustment is implemented, it will cover a wide range of products, with the photovoltaic and battery industries being the most directly affected.
The entire photovoltaic industry chain involves 249 types of products, including silicon materials, silicon wafers, cells, modules, photovoltaic glass, etc.
According to the expected adjustment plan, the export value-added tax rebate rate for this type of products may be directly reduced from 9% to 0%.
For example, if you export a batch of photovoltaic modules worth 1 million yuan, you can get 90,000 yuan in tax rebate before, which is basically a pure profit; but after April 1st, the 90,000 yuan will be gone, and the cost will rise significantly. Many photovoltaic factory owners are worried about this, and it will not matter whether they accept the order or not.
The adjustment of the battery industry is relatively gentle, but it is also gradually declining.
From April 1 to the end of the year, the tax rebate rate for common battery products such as lithium batteries, energy storage batteries, and power banks will most likely be reduced from 9% to 6%. For every 1 million worth of goods exported, a tax rebate of 30,000 yuan will be lost; starting next year, the tax rebate rate will be completely reduced to zero.
Many cross-border e-commerce sellers who sell live products have low profits. Once the 3% tax rebate is deducted, many small orders directly turn from profits to losses.
In addition to photovoltaics and batteries, chemical raw materials, ceramics, cement, glass products, some kitchenware and other products with high energy consumption and low added value may also face the cancellation or reduction of tax rebates at the same time.
Take the small ceramic factories in Chaozhou as an example. In the past, tax rebate income accounted for more than 60% of profits. Now that subsidies are gone, many small factories have experienced cost inversion and the pressure to survive has increased dramatically.
2. Why should the country be “weaned”?
It is not to ignore the enterprises, but to help us develop in the long run
The state does this not to embarrass foreign trade enterprises, but to make the foreign trade industry move more steadily and further. There are three main reasons.
The first is to eliminate backward production capacity.
In the past, export tax rebates were used to cover the bottom line. Some companies with average product quality and lack of technical content were able to make profits with subsidies, and even maliciously lowered prices to grab orders, disrupting the industry’s price system.
Removing subsidies now can screen out small workshops with no technology and uncompetitiveness, leaving companies with strength and willingness to innovate, and promote the healthy development of the industry.
The second is to promote industrial upgrading.
my country’s photovoltaic and battery industries are already at the world’s leading level, and there is no need to rely on low-price subsidies to seize the market.
The state hopes that companies will focus on R&D, innovation, and brand building to produce higher-end and more valuable products, so that companies and workers can receive more benefits.
The other is to ease international trade frictions.
In the past, there were many export subsidies, and foreign countries often used this as an excuse to accuse my country of dumping, impose additional tariffs, and initiate trade investigations.
The gradual elimination of subsidies now is more in line with international market rules, can reduce trade barriers, and make product exports smoother.
3. Don’t think it has nothing to do with you!
Bosses and workers are all affected, one by one
This policy adjustment has a wide-ranging impact. From factory bosses to front-line workers to domestic consumers, no one can stay away.
For foreign trade bosses, profits have been greatly reduced, and they will lose money if they don’t increase prices.
The net profit margin of photovoltaic companies was originally only 5%-8%, and they suffered direct losses after the tax rebate was cancelled. Battery companies will lose 3% in tax rebate this year and 9% next year. The more orders they have, the more they may lose.
Small and medium-sized factories do not have the advantage of scale and have weak bargaining power with customers, so they face a dilemma.
For front-line workers, reduced corporate profits will reduce costs, and production cuts, holidays, reduced recruitment and even layoffs may occur.
Workers in labor-intensive industries such as ceramics and chemicals may face the problem of stagnant wages and unstable jobs, which will directly affect their income.
Ordinary people will also be affected indirectly.
In order to cope with cost pressure, companies may increase prices appropriately. Whether it is photovoltaic modules and batteries exported to foreign countries, or ceramic tableware and power banks returned to the domestic market, the prices may rise, and daily shopping may cost more.
Four. Stop being so hard on yourself!
Foreign trade bosses, hurry up and do these three things
The policy trend has been set. Complaining and worrying are useless. We can only find ways to adapt.
The following are three suggestions for foreign trade bosses.
First, calculate costs quickly and increase prices when they are needed.
Don’t hold on to the idea of small profits but quick turnover. If you don’t increase the price now, you will lose money.
Calculate the profit reduction due to tax rebates and add them to the quotation.
High-quality customers can accept reasonable price increases, and we must rely on product value to speak for themselves.
Second, hurry up and upgrade your products, don’t stick to low-end products.
Invest more money in research and development and design to improve product quality and added value.
For example, photovoltaic companies make high-efficiency energy-saving components, and battery companies make high-end energy storage products. The same products can be sold for 20% more, and they can still make profits even without tax rebates.
Third, explore diversified markets and don’t just rely on the European and American markets.
Emerging markets such as Southeast Asia, the Middle East, and Latin America have strong demand and low competition. By opening up these channels, you don’t have to rely on low prices to grab orders. The profits are more stable and the risks are smaller.
5. Written at the end: short-term pain, long-term rebirth
This adjustment of export tax rebates is a test for all foreign traders.
In the short term, subsidies are gone and profits are reduced, which is a great pressure; but in the long term, this can help us get rid of our dependence on subsidies and gain a foothold in the international market based on our strength.
In the future foreign trade market, what matters is technology, quality and brand, not low prices and subsidies.
Only companies that can survive this difficult period and complete upgrading and transformation can become industry leaders; those companies that rely on subsidies and are unwilling to innovate will be eliminated by the market sooner or later.
Friends in the foreign trade industry, adjust your mentality, actively respond to changes, and survive the transition period. Our foreign trade industry will definitely be healthier and more promising!
Finally, I would like to ask everyone, which category of foreign trade are you engaged in?
Will this policy adjustment have a big impact on your business and work?
Are you going to respond by raising prices, or are there other ways?
Welcome to communicate together in the comment area, give each other ideas, and work together to tide over difficulties!
