Exporters stuck in neutral as costs rise, demand stagnates

Toys are ready for export from a company in Lianyungang, Jiangsu province. SI WEI/CHINA DAILY

High costs, bureaucracy and labor difficulties weigh on enterprises seeking to sell to foreign markets

Chinese exporters are still grappling with difficulties, even though overseas shipments by the world's largest merchandise trader have improved in recent months and the government has acted to support trade and ensure the 7.5 percent foreign trade target is achieved.

"Difficulties involving tax rebates and fees persist, which burden us a lot along with rising costs at home and sluggish demand abroad," Yang Jun, general manager for international trade at Hefei Rongshida Sanyo Electric Co Ltd, told China Daily.

Things became so tough that from January to April this year, exports and imports decreased simultaneously, a rare combination in recent decades.

In May, the State Council, the nation's cabinet, launched trade support measures that included standardizing business operations and improving tax rebates.

China became the world's largest merchandise trader in 2013, but its foreign trade significantly slowed compared with the levels that prevailed before the 2008 global financial crisis. That crisis had a lasting impact on demand in the United States and the European Union. At the same time, domestic costs have been rising and making China's products less competitive.

Meanwhile, the country's trade growth engine is moving from the coast to inland areas, such as Anhui and Shaanxi provinces and Chongqing municipality.

Thanks to government support and a recovery in developed economies, China's foreign trade has rebounded. In the first eight months of this year, total trade grew 2.3 percent year-on-year, compared with a 0.5 percent contraction in the first four months.

But some exporters continue to complain about export tax rebate procedures.

"As tax rebates involve many authorities such as customs, foreign exchange and tax agencies, we hope their operations can be better coordinated to make the process more transparent, which will improve our cash management," Yang said.

"Sometimes, when tax rebate documents don't meet the requirements, neither the customs nor the foreign exchange officials will take the initiative to solve the problem, and we are caught in a dilemma. Communications among agencies are insufficient," Yang added.

Export tax rebates are refunds of indirect taxes paid by exporting enterprises in the production and distribution process, a policy that has been in place since the 1980s to support the country's competitiveness in foreign markets by eliminating double taxation on exported goods.

Gao Yun, director of the financial department of Anhui Jianghuai Automobile Co Ltd, said: "Although an online service has been introduced for tax rebates, paper customs declarations are still needed. And if the freight forwarder loses a declaration, it's almost impossible to get a replacement because of the insufficient information sharing among authorities."

Sanyo's Yang also criticized "uncontrolled and fast-rising fees from shipping companies targeting Chinese exporters".

And rising labor costs since the 2008 global financial crisis have become major burdens for Chinese exporters.

Pan Tongchun, president of Anhui Huaanda (Group) Co Ltd, said: "Business has been very hard since the second half of 2013." The company exports wicker products to the US. "Wages for my plant's more than 10,000 workers have risen more than 20 percent annually over the past five years."

Pan also complained about financing costs, saying that banks remain reluctant to lend to private businesses.

Ma Liying, tax and treasury director at LCFC (Hefei) Electronics Technology Co Ltd, said that rising labor costs and a shortage of skilled workers are causing headaches for exporters all over China.

"Labor costs in the coastal region have risen very fast in recent years, and that's why we moved to Hefei in 2011. But labor supplies are still tight," Ma said. The young generation of workers, he said, has a very different attitude toward work than their parents.

"They care more about their own interests and tend to abandon boring and repetitive work on production lines, which increases labor shortages.

"Last year we began using robots on production lines for packaging and fastening nuts and bolts. But it will take about three years for the robots to assume all work now done by humans," Ma said.

Ling Zhugui, deputy general accountant of tire producer Giti (Anhui) Co Ltd, said that rising costs also come from stricter environmental standards and heightened expectations for corporate social responsibility.

Trade friction in foreign markets, combined with weak demand in the US and EU, also add to the burdens of the company, Ling said.

Giti's exports in the January-July period remained flat compared with the same period last year. Ling said that an export increase of 2 or 3 percent this year will be "very satisfactory".

Zhang Ji, director-general of the department of foreign trade at the Ministry of Commerce, said China's foreign trade still has comprehensive advantages, including sound infrastructure and industrial facilities, skilled labor and a favorable business environment.

"The era of rapid trade growth seen in the past three decades may have gone. But even a long time from now, it's possible for China's foreign trade to record relatively high growth," Zhang said recently.

External markets will not fundamentally improve for the rest of this year, but the country's foreign trade will maintain steady growth for the whole year, he added.