Preferential tariff treatment for Chinese companies exporting products to 32 countries – including the 27 members of the European Union (EU), the United Kingdom, Canada, Turkey, Ukraine and Liechtenstein – has ended, as the country’s export products become more competitive.
Since December 1, the General Administration of Chinese Customs has stopped issuing certificates of origin under the Generalized System of Preferences (GSP) for exports to the 32 countries, which no longer offer Chinese GSP status, marking the end of the preferential tariff regime for Chinese exporters.
The SPG system, used around the world, reduces levies on certain imports from developing countries and encourages exports from less developed economies, thereby promoting economic growth. The system also helps reduce the cost of import products for the savings of donors.
Limited impact on China’s overall exports
This move is seen by many as a natural development, as Chinese products have become more competitive in world trade. Some companies said the impact will be limited, compared to other issues like inflation.
“Preferential tariffs have been gradually reduced. So basically we don’t expect any impact on our industrial base in China. We have massive inflation of raw materials, of transport costs. This is the biggest impact, ”said Ludovic Weber, CEO of Saint-Gobain Asia-Pacific, a company that mainly exports industrial materials like silicone sealant from China to America, Europe and the United States. South East Asia.
In fact, China has not received GSP privileges from these regions for many years. The EU stopped granting the certificate in 2015, when China was elevated to an upper middle-income country by the World Bank. Switzerland and Canada both canceled it in 2014.
China has benefited from the preferential tariff treatment of 40 countries since 1978, but currently only New Zealand, Australia and Norway still grant GSP status to China.
The volume of trade in recent years has also provided exporters with some protection against rising tariffs.
“From 2012 to 2019, the 28 EU member countries, Turkey and Canada gradually canceled their GSPs with China. But China’s exports to the EU have grown steadily. In 2020, China became the EU’s largest trading partner. Canceling the SPG could end up having a bigger impact on businesses in Europe, ”said Ke Jing, associate research professor at the Institute of International Relations at the Shanghai Academy of Social Sciences.
Double-edged sword for labor-intensive industries
While the cancellation of the GSP may not have a significant impact on the overall economy, some labor-intensive, low-margin exporters will still be affected by this move.
“(With) the GSP, importers would only pay 8-12% (of the tariff). But if we go back to normal conditions, the percentage will drop to 15 or 25%. We also expect a 10% increase in container shipping costs, ”said Allen Wang, department manager at Shanghai Textile Decoration Corp. of Orient International Enterprise.
Wang expressed concern that nearly 90 percent of his orders come from Europe and Canada. He expected his customers to offset the resulting higher costs by offering lower prices to suppliers.
However, experts believe the move may be an opportunity for these exporters to upgrade faster, as the cancellation of the GSP will accelerate business innovation if they are to remain competitive.