The SARS outbreak will lead to a loss of 20 to 30 billion RMB in China's tax revenue this year. This prediction is based on the possible impact that the disease will have on the economy and the government's efforts to reduce taxes and fees for some industries said the State Administration of Taxation.

With an aim to alleviate the financial burden of SARS-hit sectors, the Ministry of Finance and the State Administration of Taxation have decided to reduce or waive taxes on them. Last week, the two departments jointly issued a notice, saying taxes and fees, including business tax, levied on some industries such as tourism and hotels will be reduced or waived between May 1 and September 30.

In April, the two departments also announced the provision of preferential income tax policies for medical workers and those who donated money or goods for the prevention of SARS. In Beijing, for example, the local government has cut the business tax for cab drivers.

During the first four months of this year, the country's tax revenue stood at 707.7 billion RMB (US$85.3 billion), an increase of 25.8 per cent compared with the same period last year, official figures show. The growth rate was 0.8 percentage points lower than the first three months. But an analysis of China's tax structure shows the disease will not have a very significant impact on the total revenue.

Presently, value-added tax and consumption tax, which make up more than 60 per cent of the total revenue, come mainly from the manufacturing sector. Business tax from tourism, catering and transportation, which was seriously hit by SARS, only accounted for a small share of the total revenue.

Customs duties and automobile purchasing tax, which made up 13.3 per cent of the total revenue in 2003, have also been little affected by the disease. On the contrary, fear of contracting SARS by travelling on public transport has prompted a number of people to buy their own car ahead of schedule. As a result, during the first quarter, car sales doubled and automobile purchasing tax rose year-on-year by 42.1 per cent.

Shanghai Foreign Banks to Reform Foreign Exchange Business

Seventeen foreign banks in Shanghai received the go-ahead last week to initiate a series of reforms on a trial basis with respect to their foreign exchange business.

This is the first time such reforms have been undertaken in foreign-invested banks said the Shanghai Branch of the State Administration of Foreign Exchange.

Similar reforms have been carried out successfully in 15 indigenous banks, which strengthened the local government's resolve to open up its finance market. The 17 foreign banks include the HSBC, the Development Bank of Singapore, Citibank, the Standard Chartered Bank and others from the United States, France, Australia, Belgium and Malaysia.

The move is aimed at creating an environment for Chinese and foreign banks to compete on an equal footing after foreign exchange-related business is completely opened to foreign banks, the official said.

Unemployment in China

China's official urban jobless rate rose to 4.1% by the end of March, despite the economy's sizzling 9.9% first-quarter growth. State media said 7.75 million people were registered as unemployed, an increase of 750,000 from the same period last year. Analysts estimate the real jobless rate could be around 10% and rising.

Annual Inspection of FIEs Extended to End of May

The State Administration for Industry and Commerce (SAIC) and the Registration Bureau of Foreign Investment Enterprises have recently issued a notice extending the deadline for the 2002 annual inspections of foreign-invested enterprises (FIEs) from the end of April to 31 May 2003.

Enterprises applying for annual inspection direct should note the following changes:

1. The deadline for 2002 annual inspection is extended to 31 May 2003.

2. There is no need to submit the acknowledgement of receipt issued by the local authorities for joint annual inspection.

3. Routine formalities concerning the registration of FIEs, such as establishment, alteration of details and business termination, will proceed as normal.

SAIC originally planned to carry out the 2002 annual inspection of enterprises between 1 January and 30 April 2003. All FIEs, foreign enterprises, as well as foreign-funded financial institutions, insurance companies and securities companies registered with SAIC before 31 December 2002 must apply for inspection.

In a move to strengthen the prevention and control of SARS, city-level joint annual inspection departments stopped their on-site services on 22 April instead of 30 April as originally planned to protect the health of the personnel conducting the inspections.

The deadline for annual inspections is thus extended to the end of May and all documents required should be sent by mail.

Source: Hong Kong Trade Development Council

24 Hour Chinese News Channel

A 24-hour news channel run by China's state television went on the air on May 1 promising live reports and faster, more comprehensive coverage. Experts said the CCTV News Channel's format could force authorities to relax censorship and allow competitive reporting, though the channel only mentioned the Sars outbreak four hours into its debut broadcast.

Japan-China Trade Up 40% in First Quarter

Japan remained China's top trading partner in the first quarter of 2003 with $28.4 billion in total trade, according to figures from China's General Administration of Customs. Trade volume between the two countries rose 39.6% during the quarter from a year earlier.

China recorded a $3-billion trade deficit with Japan as a 23.9% year-on-year rise in exports to $12.7 billion was overshadowed by a 55.5% increase in imports to $15.7 billion. The United States ranked second as total trade volume rose 35.8% to $25.6 billion. China had a $9.8-billion trade surplus with the U.S.

The European Union was China's third-largest trading partner, with a 40.3% increase to $25.2 billion. China had a $3-billion trade surplus with the EU. Hong Kong, the Association of Southeast Asian Nations, South Korea, Taiwan, Russia, Australia and Canada rounded out China's top 10 trading partners in the first quarter.

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