On 8 january, the ministry of information technology and industry posted a bulletin on the official website announcing that, as of 1 january 2008, we have again adjusted the provisional tariff rates and tariff lines for the import of certain consumer electronics, meta-wares and certain electronics-specific raw materials。
Compared to the first adjusted rates and tariff lines in 2007, the new provisional tax rates for the upper core parts of the liquid crystal screen were increased, but no tariff was raised for imports of liquid crystal screen finished products。
For domestic lcd firms, tariff adjustments for imports of upper lcd components are clearly a cost-related event. As a result of the refusal of foreign lcd companies to transfer core technology and high-grade lcd production lines to their home countries, many domestic paint and electricity companies have long faced an upstream panel being subjected to human constraints。
Prior to this, domestic colorers suggested that the state increase the import tariff on lcd screens to force foreign lcd screens to move production lines into the country. While it is clear that the tariff adjustment allowed domestic firms to achieve their objectives to some extent, it is clear that the tariff game around the import of upstream components of the liquid crystal screen will continue due to the existence of different stakeholders。
Tariff policy adjustments
In order to support the development of the new technology industry, the national commission for development and development, the ministry of information and communications, the general tax administration and the general customs administration have, at various times, adopted a policy of support。
In march 2005, in order to establish its own lcd production line in the country as soon as possible, the general tax administration announced at that time that, from 1 november 2003 to 31 december 2008, customs duties would be waived on raw materials and consumables that could not be produced in the importing country by the lcd producers; and on building materials, ancillary systems and spare parts for production equipment that could not be produced in the importing country by the lcd producers, with exemptions from import duties and value added duties on import chains。
It was with the help of this preferential policy that the east of kyoto, the upper high-ridden nec and the yongteng light power began to introduce from abroad, with zero tariffs in 2003, upstream core components and production line equipment, and quickly established their own three five-generation lines。
However, as these enterprises are ambitiously preparing to rise to more than 6 generations of lcd production lines, lcd firms abroad are beginning to reject the transfer of core technology, while companies such as glass panels, backlight emulations, and so forth, are reluctant to move production lines such as glass panels to their home countries because of the zero-tariff policy。
In such cases, the role of the old zero-tariff policy is no longer evident. Starting in january 2007, for the first time, the ministry of information industry announced an adjustment to the provisional rate for the import of selected electronics and raw materials, with an appropriate increase in the provisional import tariff rate for lcd 2006 and the addition of a plasma monitor to produce the provisional import tariff for 2007 for silver electrodes, mesolyser, shield slurry, fluorescent powder and tablet television。
The main element of this adjustment is the import rate for core components upstream of the plasma screen. Other reasons behind such decisions, such as that of the ministry of information industry, are the fact that in 2006 domestic enterprises such as rainbow group began to set up themselves in areas such as plasma fluorescent slurry, a strategy that can protect domestic enterprises that are just beginning。
On 8 january this year, the ministry of information and industry's bulletin again adjusted the provisional duty on imports of electronic products by adding to the provisional duty on imports of components such as the tft-lcd lcd liquid crystal display screen for the production of back-ray modules, the lcd back-ray module for cold cathode lamps, the lcd plate glass for the lcd screen, the lcd glass panel for the manufacture of tablet monitors for the use of ultrasound washing devices。
Journalists were informed that the provisional import tariff for lcd glass panels, lcd screens with original glass, lcd backlight modules and lcd panels was 3 per cent, while the provisional tariff for lcd backlight modules with cold cathode lamps was 4 per cent and remained low。
Increasing tariffs on these upstream components can protect domestic enterprises, as domestic first-generation liquid crystal glass panels also started to fire in 2008, as did the glass plate project in angorko, while companies such as the east of kyoto and haishin began to enter the backlight module. These enterprises, together with foreign firms such as konning, are “baby” in terms of financial strength and industrial size, and require policy protection, and raising import tariffs is the most reasonable and moderate safeguard。
However, this adjustment has also led to higher costs for domestic firms to march into lcd screens and lcd groups, in particular for the extensive purchase of plasma screen production line equipment by long-windows in 2007 and for domestic paint and electricity companies such as haisin and tcl to enter lcds, which will increase their costs。
According to nec, “these lcd upstream components account for more than 50 per cent of lcd costs, especially back-light modulations and glass panels, which will result in a 3-5 per cent increase in the cost of lcd enterprises to establish new production lines”
In the long term, however, higher tariffs on imports of upstream parts of tablets would be beneficial to the domestic lcd industry. It was also stated that “the gradual increase in tariffs on imports of these upstream components would allow these enterprises, including the united states of america, conning, japanese nitro, to take into account chinese investment in establishing production lines and even consider cooperation with rainbows”
Differences of interest behind the transfer of industries
It is clear that chinese flat-board upstream firms are caught up in a paradox: if zero tariffs are applied, the cost of establishing a lcd production line will be reduced; and higher import tariffs, although the cost of establishing new lines may increase, will help foreign firms to transfer core technologies or front-end production lines to china。
Industry has indicated that import tariffs on upstream parts and production equipment in the tablet industry have shown an upward trend in classification since 2006, but that their adjustment has clearly not been fast enough because, if put in place, domestic flatboard industries may find themselves in an unsustainable position。
The ambivalence is even more evident for domestic flat-screen television companies: on the one hand, they want to purchase liquid crystals and plasma panels at minimal cost; on the other hand, it is hoped that the domestic lcd television and plasma television upstream industries will be established。
In the past, the departments of the ministry of information and industry had made their own proposals to raise import tariffs on liquid crystal screens and to encourage foreign brands to invest in building plants in china by raising import duties, and to develop and produce upstream resources with local brands. At the same time, in order to ensure a competitive advantage in the next generation of tablet products, it is hoped that the government will give industrial investment and technical support。
This is clearly a dilemma。
According to chen kong, the eastern securities analyst, “increased tariffs on lcd imports mean higher costs for colour companies, but at the same time allow foreign lcd firms to transfer the front end of their production line to china, taking into account cost issues, but import tariffs must be raised to exceed the affordable costs of foreign investment to be effective”
It was described that if the lcd import tariffs were increased by 15 per cent, domestic flat-screen television companies would be under 15 per cent cost pressure in the short term (see tablets). Lcd companies may consider transferring more than six generations of lcd production lines to their home countries。
Of course, in the long run, if foreign investment can shift the front end of the lcd to china, it will mean addressing the upstream “bottleneck” that has plagued the national production tablet for many years。
According to the domestic flat-screen television industry, it was the 30 billion yuan in national funding for the crt era, which attracted eight large-scale companies, such as shenzhen, fushan, dong-sung and the associated industries, to japanese companies to create a channel production line in shenzhen, fushan, dong-sung, and so on, that enabled the national-produced paint to completely break foreign brands in the 1990s。
However, the aspirations of national flat-board enterprises will not be met at least in 2008. According to ministry of information industry announcements, the adjusted import tariffs do not include liquid crystal screens, which remain at 3 per cent in 2007。
For the domestic lcd industry, there is still a lack of capacity to produce large screen lcd screens, which may affect their living environment if foreign lcd manufacturers enter。
In addition, the imposition of zero tariffs on some electronic products originating in hong kong and macao that have completed their standards of origin under arrangements for closer economic and trade relations with hong kong and macao in the mainland may provide some possibilities for foreign capital to circumvent tariffs through transit, and these also require adjustments to existing tariff policies。
It is clear that the game around tariff adjustment for upstream parts of the flat-board industry will continue, and that the awkwardness of the entire chinese flat-board television chain in the face of global industrial transfers is a reflection of the different claims of different stakeholders。
