Guangdong to ease pressure on factories

Guangdong province is planning to offer tax and administrative relief to its export processing trade sector, which uses imported materials and parts to assemble finished goods, to offset rising inflation, weak export markets, labor shortages and power outages, the South China Morning Post reported. “It gives us some cold water in the scorching heat, which is better than nothing,” said an official from the Federation of Hong Kong Industries (FHKI). “We need to have confidence restored.” Many of the factories in Guangdong have Hong Kong owners. Manufacturers are complaining that business confidence in the future of the Pearl River Delta, sometimes referred to as the “factory of the world,” is now lower than during the global financial crisis due to soaring prices for raw materials and labor. The FHKI warned earlier this year that one in every three or four processing trade factories with Hong Kong ownership could close within two years. The Guangdong government is expected to extend the tax-free period on imported machinery – which is usually subject to a 17% value-added tax – by three months. Other incentives could include helping manufacturers obtain bank loans to move to environmentally friendly manufacturing and upgrade their facilities.