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"**We hope that the government's macro-control will be stable and orderly, allowing the industry to develop healthily and lastingly,**" said Guo Yongxin, Director of the Industry Research Division at the China Light Industry Council, in an interview with this reporter. He was responding to the recent challenges faced by some light industrial companies.
Since the second half of 2007, a series of regulatory policies—including export tax rebate adjustments and restrictions on processing trade—were introduced, significantly increasing pressure on export-oriented processing enterprises. Tens of thousands of companies in the Pearl River Delta are now facing difficult choices: withdrawal, closure, or relocation.
Guo noted that the government has been taking strong measures to address overcapacity, but these actions have "obviously disrupted" the market. He emphasized the need for more balanced and diversified regulatory approaches.
Recently, Guo completed a research project titled "Light Industry Policy and Regulatory Strategy," proposing ten industrial regulation mechanisms tailored for market-based competition. His report, which advocates for a more flexible and comprehensive regulatory framework, has been submitted to the National Development and Reform Commission and the Ministry of Finance, awaiting further feedback.
The current challenges in the Pearl River Delta are the result of multiple pressures: strict government regulations, rising labor and raw material costs, and increased global competition. The new export tax rebate policy implemented in July 2007 reduced the toy industry’s rebate rate from 13% to 11%, a small but significant change for companies with already slim margins.
Guo pointed out that different industries require different regulatory strategies. While the toy industry is highly export-dependent, it also supports 3 million jobs, making it a key sector to consider in policy-making.
Similarly, the plastics industry suffered greatly from the reduction in export tax rebates—from 11% to 5%, resulting in a loss of approximately $1.217 billion in tax refunds, or about 35% of its annual profits. The paper products industry also saw a 30% drop in expected profits.
According to Li Guojun, executive vice president of the China Plastics Processing Industry Association, plastic product exports grew by 15.15% from January to September 2007, but the growth rate slowed compared to the previous year.
Industry leaders are concerned that further tax rebate cuts may be announced. Guo suggested that before implementing such policies, the government should broaden consultations with affected businesses. If a policy affects more than 20% of an industry’s profits, enterprise input must be considered.
Despite the challenges, Li remains optimistic. He believes that energy-saving and environmental protection initiatives will continue to drive demand for plastic products, replacing traditional high-energy sectors like steel and wood. Additionally, he expects no major policy changes before September due to the Olympic Games.
In response to growing government involvement, Guo’s research proposes ten regulatory mechanisms designed for market-based competition. These include joint planning between central and local governments, sustainable development frameworks, IT support for economic forecasting, improvements in foreign trade structures, and fiscal and tax policy controls.
His goal is to ensure that regulatory policies are more comprehensive, stable, and appropriate, avoiding unnecessary disruptions. “We hope that the control measures will be diverse, avoid major fluctuations, and support long-term sustainable development,†Guo concluded.