SE Asian Nations Vie to Usurp 'Made in China' Label With Tax, Trade Incentives

SE Asian Nations Vie to Usurp 'Made in China' Label With Tax, Trade Incentives

Yicai Global

Date: Sat, 03/25/2017 - 22:04 / source:Yicai
SE Asian Nations Vie to Usurp 'Made in China' Label With Tax, Trade Incentives
SE Asian Nations Vie to Usurp 'Made in China' Label With Tax, Trade Incentives

(Yicai Global) June 8 -- Southeast Asian nations are striving to compete with China through planned preferential policies on trade, tax and land. Businesses from developed countries such as the US and Japan, and even some Chinese firms, are enjoying perks in the region that they do not get at home.

Tax breaks have become the main way to attract investment. Vietnam's Ho Chi Minh exempted New Hope Liuhe Co. [SHE:000876], one of China's top 500 companies, from paying tax for the first 3 years and just half for the subsequent 5 years, according to the Qingdao-based company's annual report. Income tax on the company's main business in Hanoi is levied at just 10 percent, much lower than the usual 22 percent. In Laos, New Hope will pay no tax for 5 years starting from the first year that it makes a profit.

Southeast Asian countries are also counting on low land prices to lure investors. Texhong Textile Group Ltd. [HKG:2678] disclosed in its earnings statement that the initial price of its industrial park in Vietnam, covering an area of 67,000 square meters, was just CNY250 (USD38) per square meter. The cost was part of the fees paid to local government departments and included the price of buying and developing the land.

The tendency of manufacturing industry to rapidly shift to Southeast Asia is evident from available figures. Bros Eastern Co. [SHA:601339], one of the world's largest manufacturers of fiber-dyed yarn, set up its Vietnam factory in 2013. The plant's spindle-producing capacity contributed up to 40 percent of the company's total capacity in 2015.

Yue Yuen Industrial Holdings Ltd. [HKG:0551], which is one of the world's biggest shoemakers and produces for brands such as Adidas and Nike, had half of its production lines in mainland China in 2009. That had fallen to 25 percent in 2015. Meanwhile, its lines in Vietnam and Indonesia accounted for 42 percent and 32 percent respectively of the firm's total.

High-tech machinery and electronics firms are also seeking to establish production centers outside China. The export of automatic data processing equipment and components from China slumped 15 percent last year after declining the previous two years by 1.7 percent and 1.3 percent.

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