National Policies Help Printing Enterprises Step Out of the Shadow of Thin Profits

With the U.S. financial crisis and a global economic downturn, China's economy also showed signs of recession. To ensure the steady and healthy development of the national economy, the state issued a series of policies and measures to provide support. The printing industry, which had weathered many storms in an era of thin profits, found things even harder after the baptism of the crisis; fortunately, the state extended a helping hand and brought the printing industry an opportunity for development.

From export to domestic sales, seeking a way out

Rising labor costs, exchange losses and poor capital turnover became the main bottlenecks hindering the development of printing enterprises. Printing enterprises focused on export packaging business in particular were undoubtedly the biggest victims. With costs racing against profits and enterprises locked in a game with customers, market transfer will become a powerful measure for packaging printing enterprises to find a way out.

Facing the economic crisis, the central government forcefully introduced a policy of expanding domestic demand and will invest 4 trillion yuan before 2010 to expand domestic demand. The government's increased support for loans to small and medium-sized enterprises and the adjustment of import tariff rates for printing and printing equipment enterprises also strongly promoted the development of the printing industry.

Among the enterprises that took part in the 2008 Autumn Canton Fair, about 70% were preparing to choose 'from export to domestic sales'. In the midst of difficulty, these policies will play a positive role in promoting the expansion of domestic demand in the printing industry.

Relaxing credit, ushering in the dawn

'Cancelling the credit scale restrictions on commercial banks' is one of the newly announced domestic-demand expansion measures of the State Council, which declares the end of the central bank's policy of regulating bank credit scale on a quarterly basis. This makes it easier for small and medium-sized enterprises short of funds to obtain loan support. Previously, because of credit scale restrictions, some normal loan demands could not be met, and it was actually small enterprises that suffered. Since large enterprises are mostly long-term customers of banks, banks will give priority to ensuring their credit supply, and the first thing to be squeezed is loans to small enterprises. Now that the credit scale restriction has been cancelled, banks have more autonomy in lending.

Besides cancelling the credit scale restriction, to solve the financing difficulties of small and medium-sized enterprises, the central government has also arranged special funds for small and medium-sized enterprises totaling 5.11 billion yuan, of which, out of the 2.2 billion yuan newly added this year, 1.6 billion yuan will be used to support credit guarantee institutions for small and medium-sized enterprises in providing loan guarantee services to them. At the same time, financial services for small and medium-sized enterprises are being innovated: some financial departments encourage the development of new financial institutions suited to the characteristics of small and medium-sized enterprises, such as microcredit companies and village and township banks, actively adjust the credit structure, appropriately increase the credit scale for small and medium-sized enterprises and increase credit input to them.

In 2008, there were 102,043 printing enterprises of various types nationwide; among these more than 100,000 printing enterprises, 80% were small and medium-sized enterprises engaged in workshop-style production. The introduction of the new policies has undoubtedly brought the dawn to the vast number of printing enterprises.

Offsetting VAT, timely help in the snow

In November 2008, the State Council executive meeting reviewed and in principle adopted the 'Interim Regulations of the People's Republic of China on Value-Added Tax', stipulating that a VAT transformation plan would be implemented nationwide in 2009. From January 1, 2009, on the premise of maintaining the current VAT rates unchanged, all general VAT taxpayers nationwide (regardless of region or industry) are allowed to offset the input tax contained in their newly purchased equipment, and any uncredited input tax is carried forward to the next period for continued offsetting.

For example, when buying domestic printing equipment worth 1 million yuan, the VAT amount that can be offset is 1,000,000/1.17×17% = 145,299 yuan. The equipment purchased by the printing enterprise costs nearly 150,000 yuan less than before. For small and medium-sized printing enterprises that mainly buy domestic equipment, this is no small sum. Therefore, this reform will help promote printing enterprises to buy domestic printing equipment.

As a supporting measure of the VAT transformation reform, the VAT exemption policy for imported equipment and the VAT policy for foreign-invested enterprises purchasing domestic equipment, which had benefited printing enterprises, will be abolished. Because the relevant departments examine tax exemptions for imported printing machines very strictly - there must be a tax exemption quota approved by a government department, and the customs also has a limit on import volume - only a small number of enterprises nationwide (most of them state-owned printing enterprises in the press and publication system) can enjoy tax exemption preferences, so abolishing the VAT exemption policy for imported equipment has little impact on the printing industry.

Lowering tariffs, introducing equipment

Under the current situation of ever-increasing economic pressure, it is crucial to prevent a too-rapid decline in exports and create a good environment for foreign trade development. On October 21, 2008, the Ministry of Finance and the State Administration of Taxation issued the 'Notice on Raising the Export Tax Rebate Rates for Some Commodities', stipulating that from November 1, 2008, export tax rebate rates for some labor-intensive, high-technology-content and high-value-added commodities would be appropriately raised. The export tax rebate rates for some publications and paper stationery will be raised to 13% and 11% respectively. First, paper stationery: the previous export tax rebate rate varied between 5% and 7%, and is now raised to 11%. Second, publications: the previous export tax rebate rate varied between 11% and 13%, and is now raised to 13%.

Raising the export tax rebate will become a 'life-saving panacea' for many export enterprises, not only raising enterprises' net profit margin on exports and easing export pressure, but also alleviating the tight capital turnover of some enterprises.

On December 17, 2008, the Ministry of Finance issued the '2009 Tariff Implementation Plan', announcing that the import and export tariff schedules would be further adjusted from January 1, 2009. This adjustment involves two parts for the printing industry: first, continuing to apply interim import duty rates to 16 types of printing equipment and spare parts; second, adjusting the specific and compound duty rates on the import of more than 10 types of printing photosensitive materials. Next year the state will continue to apply relatively low interim import duty rates to more than 670 commodities, including 16 types of printing equipment and spare parts, covering different types of printing equipment such as computer-to-plate machines, sheet-fed offset presses, screen printing machines and inkjet printing machines.

Comparing the 'Table of Interim Tax Rates on Imported Commodities' for 2009 and 2008, we can see that the 2009 interim tax rate is 0 for five commodities - computer-to-plate (CTP) machines, parts for computer-to-plate machines, remote ink volume control devices for offset presses, thermal print heads and contact image sensors (scanning heads) - and the 2009 interim tax rates for the other 11 commodities are 3%, 6%, 7%, 8% and 9% respectively.

Applying for interest subsidies, obtaining subsidies

On January 27, 2008, the Ministry of Finance and the Ministry of Commerce jointly issued the 'Notice on Doing a Good Job in Applying for the 2007 Import Interest Subsidy Funds', stipulating that some equipment imported in 2007 could apply for interest subsidy funds.

Through the active coordination of the General Administration of Press and Publication, three types of offset presses can apply for interest subsidies: web offset presses for newspapers, commercial web offset presses, and sheet-fed offset presses. According to industry experts, these three types of offset presses are the most widely used and important presses in publication printing, and are also printing equipment with very large shares of import volume and import value. According to customs statistics, in 2007, 1,135 sheet-fed presses were imported, with an import value of 728 million US dollars, and 114 web presses were imported, with an import value of 146 million US dollars; the import value of the two kinds of equipment accounted for 60% of the total import value. In addition, die-cutting machines, which are widely used in the packaging printing industry, can also apply.

The standard for import interest subsidies is: the import value is taken as the principal for calculating the interest subsidy, and the subsidy rate is no higher than the most recent one-year RMB loan rate published by the People's Bank of China at the time of subsidy settlement. The Ministry of Finance and the Ministry of Commerce determine the subsidy coefficient within the total annual subsidy funds and verify the subsidy amount.

For printing enterprises under multiple pressures - falling printing prices, rising raw and auxiliary materials, rising labor costs and financing difficulties - the implementation of the import interest subsidy policy allows enterprises to obtain interest subsidy funds of up to 6%-7% of the import value; with a 28.7% tax rate plus a 6%-7% subsidy rate, enterprises can obtain a subsidy of about 35% of the import value. In addition, through the import of offset presses, domestic printing machine manufacturers can also learn advanced foreign technology and improve their own equipment, which is very favorable for enterprise technological transformation.

—This article is reprinted from China Packaging Network (pack.cn); original link: http://news.pack.cn/show-361956.html