China has held off enforcing a controversial new rule that would force manufacturers of cheaper goods to pay cash deposits on imports of essential raw materials.

The delay may provide time for investors to lobby decision-makers in Beijing to persuade them to accept letters of credit (L/Cs) in lieu of cash deposits under new trading laws meant to make the manufacture of cheap goods in China more difficult.

Reprieve

The postponement gives tens of thousands of Chinese manufacturers a reprieve.

Hong Kong investors were particularly vocal in their calls for China to accept L/Cs in lieu of cash deposits under Beijing's new trade policy (DC World News, 10 August 2007).

The delay follows intense lobbying by major industry bodies and means that, for the time being at least, manufacturers are spared having to pay cash deposits for importing 1,853 types of raw materials restricted under the rule.

Implications

Exporters in industries accounting for 15 per cent of Chinese exports, including toys, plastics and furniture, would have had to pay a 50 per cent deposit on imports of 1,853 different raw materials like metals and textiles.

The deposit would become repayable when the finished goods are exported, but businessmen say their cash flow would be hit hard if a cash deposit were required.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.