A new list of import tariff reductions, mainly covering glass, precious stones, and iron and steel products has been issued in China.
Luoyang Glass Co., which has H shares listed in Hong Kong and A s…
A new list of import tariff reductions, mainly covering glass, precious stones, and iron and steel products has been issued in China. Luoyang Glass Co., which has H shares listed in Hong Kong and A shares listed in Shanghai, shrugged off fears of any material impact on its operations despite the threat of cheaper imports. An officer in the Chinese company“s securities department said in an interview that Luoyang management is confident the company can maintain its competitiveness and share of the Chinese market even if the tariff cuts result in the entry of less costly imported glass products. He said most of the company“s glass products are cheaper than those made by overseas producers. The official added that the fragility of glass products makes transport relatively expensive, forming a good economic barrier to most imports. At the same time, all raw materials required for production of the firm“s core products are purchased from domestic suppliers, so the tariff cuts will not help Luoyang lower production costs, he said. The officer also said the Luoyang-based firm is engaged in a longstanding drive to improve the quality of its products due to rising competition in the domestic market. He said that as a result, the quality of the company“s plate glass is reaching global standards. The officer said the firm had earlier forecast making 244 million yuan in after-tax profits in 1995. The company said in its interim report last year that it had net earnings of 140 million yuan in the first half of 1995. The list, published in the International Business newspaper, brought the number of new tariffs announced so far to 2,920. The new tariffs became effective on 1 April as China hastens its bid to enter the World Trade Organisation by gradually dismantling the barriers which have deterred foreign investors from penetrating its domestic market. President Jiang Zemin pledged during the Asia-Pacific Economic Co-operation meeting in Osaka in November last year that Beijing would slash tariffs on at least 4,000 items out of 6,000. The list sees the tariffs on coloured float glass cut from 30% to 25%. Aircraft safety glass will be charged a new rate of 2% from 6%, while car safety glass faces 30% import tariffs, instead of 40%. Luoyang Glass chairman Guo Xiaohuan said its price competitiveness would shield the company from being harmed by cheaper imports. He said Luoyang was selling its float glass at about 2,400 yuan (about HK$ 2,230) a tonne on the domestic market, compared with the imports which were sold at more than 3,000 yuan per tonne excluding the tariffs and transport costs. Mr. Guo said the price of imported processed glass products was more than double that of Luoyang“s products. He admitted the tight monetary policy had dampened domestic demand for float glass and its product price would remain flat this year. “It is unlikely that a company“s earnings can grow every year,” he said. Sun Hung Kai Securities analyst Chris Fung said he was more concerned about an excessive supply of float glass in China than the impact of tariff cuts on the company. He said the mainland had 43 float glass production lines and there would be about 10 more production lines over the next few years. “Unless Beijing ends the austerity programme, the demand will not pick up while there will be a rise in supply,” Mr. Fung said.