Page 138 - 2016_WhitePaper_web
P. 138
6 White Paper on the Business Environment in China
paigns by local citizenry, Environmental Protection Minister Over the course of 2009, six types of fees for road mainte-
Zhou Shengxian went on the record as saying that, “The govern- nance and management were abolished and revenue from fuel
ment will increase transparency and public involvement in de- consumption tax was reported to exceed 355 billion yuan.69
cisions regarding major projects with a potential environmental
impact” and that “his ministry will make concerted efforts with In a notable move in mid-December 2015, the Nation-
other government agencies to ensure that the requirement [for al Development and Reform Commission announced that,
all large projects to undergo stringent risk assessments] is fully despite the drop in international oil crude prices, they would
honored.”65 be suspending the downward price adjustment of domestic
refined oil products in an effort to combat air pollution. In a
Minister Zhou’s attention is unsurprising; China Society for statement issued by Xinhua, the NDRC said: “Giving full play
Environmental Sciences’ Yang Zhaofei indicated earlier in 2012 to the leverage effect of refined oil prices is an important way
that “the number of environmental ‘mass protests’ [had] been to promote energy conservation and tackle air pollution.” The
growing by 29 percent annually in recent years.”65 mechanism, which took effect in March 2013, was instituted
to reflect the corresponding adjustment in the price of refined
Increased scrutiny from both the public as well as municipal oil products when international crude oil prices translate into
authorities’ provincial- and central-level masters will likely have a change of more than RMB 50 per ton for gasoline and diesel
positive effects for the environment. Whether this scrutiny has prices within a period of 10 working days. With auto emissions
any substantive effect on foreign investment or the relative ease being one of the major reasons for pollution, NDRC has ex-
of completing large-scale chemical and energy projects will be pressed its commitment to maintain steady domestic prices for
seen in coming years. refined products so that less oil will be consumed, leading to an
improvement in environment and air quality.74
Notable Policy Activity
Resource Tax Pilot and Expansion
Fuel Tax Increases In July 2010, the NRDC indicated that it would expand
Perhaps China Daily said it best: ‘You pay as you fill up the the resource tax pilot program introduced a month prior in the
tank. In other words, the more you drive, the more it costs you Xinjiang Uighur autonomous region to “all 12 of the western
– and the planet. This is a simple market rule but it has taken provinces and autonomous regions.”70 This program was later
nearly two decades for the government to pick a “proper time” reported to be planned to be put into effect nationwide by No-
to implement it.’66 vember 1, 2011.71
The announcement of the reform of fuel taxation, and the This tax, which will reportedly be based on price of com-
attendant price cuts, were a welcome change to the environ- modities rather than their volume, will have a benchmark rate
ment upon their announcement in late December of 2008. of 5 percent and will vary by item (including oil, natural gas,
While tax rates on gasoline, diesel, naphtha, solvents, lubri- coal and water).
cants and jet kerosene on January 1, 2009 increased by nearly Furthermore, the list of taxable resources was widened from
seven- to eight-times their former amounts, the changes were its original scope to include rare earths, salts and metals.71
accompanied by price cuts of between 14 percent (for gasoline) A China Daily-quoted analyst suggests that the new tax was
and 32 percent (for jet kerosene). Facilitated by artificially-high “definitely [benefiting] the nation’s plans for sustainable growth
prices (relative to the market) preceding the announcement, the by discouraging the exploitation of resources,” and that “it will
restructuring—aimed to allow fuel prices in China to fluctuate also help to solve the developmental imbalances in different re-
more in line with the going rate on the global market and to gions by boosting local fiscal revenues.”70
discourage conspicuous consumption—aimed to result in bet- Another researcher later told Reuters that the new tax sys-
ter efficiency in the long term, more organic control over con- tem “would shift profits from companies to governments in
sumption in general, and a more equitable distribution of tax poorer provinces.”71
burden among users.67
The historically tight control of fuel pricing was by many Cleaner Gasoline Production
parties attributed to a preference for maintaining social stability In September 2013 it was reported that Sinopec would be-
over wasteful consumption.68 gin producing cleaner gasoline ahead of the January 2014 reg-
The timing alluded to by China Daily above is often attribut- ulatory deadline enforcing a new cleanliness standard named
ed to the large discrepancy between extremely low international “National IV.”72
crude oil prices at the end of 2008 and the artificially-inflated The new standard, which was announced in 2011 and is
rate for fuel paid by Chinese consumers, which was, according described as similar to Europe’s “Euro IV,” puts a 50 parts-per-
to Reuters, “roughly equivalent to $83.50 crude.”68 million upper limit on sulphur content in gasoline. Prior to im-
138
paigns by local citizenry, Environmental Protection Minister Over the course of 2009, six types of fees for road mainte-
Zhou Shengxian went on the record as saying that, “The govern- nance and management were abolished and revenue from fuel
ment will increase transparency and public involvement in de- consumption tax was reported to exceed 355 billion yuan.69
cisions regarding major projects with a potential environmental
impact” and that “his ministry will make concerted efforts with In a notable move in mid-December 2015, the Nation-
other government agencies to ensure that the requirement [for al Development and Reform Commission announced that,
all large projects to undergo stringent risk assessments] is fully despite the drop in international oil crude prices, they would
honored.”65 be suspending the downward price adjustment of domestic
refined oil products in an effort to combat air pollution. In a
Minister Zhou’s attention is unsurprising; China Society for statement issued by Xinhua, the NDRC said: “Giving full play
Environmental Sciences’ Yang Zhaofei indicated earlier in 2012 to the leverage effect of refined oil prices is an important way
that “the number of environmental ‘mass protests’ [had] been to promote energy conservation and tackle air pollution.” The
growing by 29 percent annually in recent years.”65 mechanism, which took effect in March 2013, was instituted
to reflect the corresponding adjustment in the price of refined
Increased scrutiny from both the public as well as municipal oil products when international crude oil prices translate into
authorities’ provincial- and central-level masters will likely have a change of more than RMB 50 per ton for gasoline and diesel
positive effects for the environment. Whether this scrutiny has prices within a period of 10 working days. With auto emissions
any substantive effect on foreign investment or the relative ease being one of the major reasons for pollution, NDRC has ex-
of completing large-scale chemical and energy projects will be pressed its commitment to maintain steady domestic prices for
seen in coming years. refined products so that less oil will be consumed, leading to an
improvement in environment and air quality.74
Notable Policy Activity
Resource Tax Pilot and Expansion
Fuel Tax Increases In July 2010, the NRDC indicated that it would expand
Perhaps China Daily said it best: ‘You pay as you fill up the the resource tax pilot program introduced a month prior in the
tank. In other words, the more you drive, the more it costs you Xinjiang Uighur autonomous region to “all 12 of the western
– and the planet. This is a simple market rule but it has taken provinces and autonomous regions.”70 This program was later
nearly two decades for the government to pick a “proper time” reported to be planned to be put into effect nationwide by No-
to implement it.’66 vember 1, 2011.71
The announcement of the reform of fuel taxation, and the This tax, which will reportedly be based on price of com-
attendant price cuts, were a welcome change to the environ- modities rather than their volume, will have a benchmark rate
ment upon their announcement in late December of 2008. of 5 percent and will vary by item (including oil, natural gas,
While tax rates on gasoline, diesel, naphtha, solvents, lubri- coal and water).
cants and jet kerosene on January 1, 2009 increased by nearly Furthermore, the list of taxable resources was widened from
seven- to eight-times their former amounts, the changes were its original scope to include rare earths, salts and metals.71
accompanied by price cuts of between 14 percent (for gasoline) A China Daily-quoted analyst suggests that the new tax was
and 32 percent (for jet kerosene). Facilitated by artificially-high “definitely [benefiting] the nation’s plans for sustainable growth
prices (relative to the market) preceding the announcement, the by discouraging the exploitation of resources,” and that “it will
restructuring—aimed to allow fuel prices in China to fluctuate also help to solve the developmental imbalances in different re-
more in line with the going rate on the global market and to gions by boosting local fiscal revenues.”70
discourage conspicuous consumption—aimed to result in bet- Another researcher later told Reuters that the new tax sys-
ter efficiency in the long term, more organic control over con- tem “would shift profits from companies to governments in
sumption in general, and a more equitable distribution of tax poorer provinces.”71
burden among users.67
The historically tight control of fuel pricing was by many Cleaner Gasoline Production
parties attributed to a preference for maintaining social stability In September 2013 it was reported that Sinopec would be-
over wasteful consumption.68 gin producing cleaner gasoline ahead of the January 2014 reg-
The timing alluded to by China Daily above is often attribut- ulatory deadline enforcing a new cleanliness standard named
ed to the large discrepancy between extremely low international “National IV.”72
crude oil prices at the end of 2008 and the artificially-inflated The new standard, which was announced in 2011 and is
rate for fuel paid by Chinese consumers, which was, according described as similar to Europe’s “Euro IV,” puts a 50 parts-per-
to Reuters, “roughly equivalent to $83.50 crude.”68 million upper limit on sulphur content in gasoline. Prior to im-
138
