A three-percentage-point cut to the rate
of value added tax that Chinese manufacturers of metals and
minerals pay will have little effect on export markets, traders
Market sources claim that the low levels
of VAT exporters pay now will make the reduction more
theoretical than actual.
The Chinese prime minister Li Keqiang
announced the tax cut on March 5. The top rate of VAT, which is
levied on manufacturers - including producers of industrial
minerals - will fall by 3 points to 13%. The total value of
these tax cuts is estimated at $90 billion per year.
This follows a one-point cut to the top
rate of VAT to 16% in May 2018.
A portion of the VAT can be rebated for
some exported goods, but there is no remittance on mineral
exports. This means that, in theory, the cut could deliver a
saving of 3% on the pre-tax price of any material bought from
China is a major exporter of a large
number of metals and minerals, including antimony, bismuth,
refractory materials, pigments and ceramics.
But traders downplayed the effect of the
cuts, noting that a large volume of mineral sales already avoid
Chinese government unveiled a massive overhaul to the existing
export system in 2018 to cut down on tax avoidance.
Although many exporters are still getting
around the tax, market participants reported to
"A lot of material is coming from
alternative channels, there are different ways to avoid VAT,
I'm not sure what impact this [3% increase] will have," an
antimony trader said.
A refractories trader noticed the same
pattern in the alumina and bauxite markets, with little impact
on price expected.
"On the face of it, you’d
think prices would be lower," the trader said, but many
producers already get around the VAT restrictions, for example,
by shipping from the special economic zone in Shenzhen, he
"There will be a little relief for a short
time but 3% is not such a big number," a European trader said,
adding that a potential increase to tariffs in the United
States could be more important.
A number of Chinese exports, including
bismuth, cobalt, and titanium dioxide currently attract a 10%
tariff on entering the US, a tariff that could rise
trade negotiations between Washington and Beijing do not bear
fruit. Antimony was
initially included on the list of proposed tariffs but was
removed in September 2018.
"The big number is the 25% increase on
tariffs and that is the big deal," the trader warned. We have
to look at the tariffs."
the response to the news was more positive from bismuth
"For some enterprises that are
fighting a shortage of cash flow, the tax cut could be a
relief," one Chinese bismuth exporter said.
"Because they bear less of a tax burden, therefore the profit
of the company will be increased, the cash flow will be
improved as well," the exporter said.
"The tax cut is undoubtedly a
good thing for the export enterprises," a second Chinese
bismuth trader said.
While an antimony exporter
noted the move could be good for domestic demand for the
By William Clarke,
Cristina Belda and Huaqing Fu
This article was first published on
March 8 and was corrected to reflect that antimony was excluded
from the list of Chinese materials facing a tariff when
imported to the US.