The Harbin Bearing Group (China) received a value-added tax rebate from the Chinese government as part of a new plan to promote capital investment in the aging industrial provinces of northeast China.
Harbin Bearing invested more than 1.8 billion Yuan on machinery and equipment in the last half of 2004, entitling it to a tax rebate of 290,000 Yuan under the program.
As accounted for, the entire 290,000 Yuan will go straight to the company's bottom line profit.
Harbin management praised the new government program, while a representative of the State Council Development Research Center said, "The pilot tax reform, which actually reduces companies' financial burdens, is aimed at spurring investment during the government's efforts to revive the old industrial bases in northeast China."
The industrial equipment tax rebate is one part of a larger strategy to encourage capital investment. Currently, the tax system discourages capital investment by taxing production and production equipment.
A shift to taxation based on consumption has been repeatedly planned and shelved since 1998 as the Chinese government feared a dramatic reduction in tax collections might be economically devastating.
The pilot program in battered northeast China is designed to test the theory that if it promotes investment, tax revenue will grow from the resulting gains in sales and profits.
Manufacturers in six target industries -- including bearing manufacturers -- in Heilongjiang, Jilin and Liaoning provinces are the only ones that currently qualify for the program. Although the program was only recently instituted, it was announced over a year ago and benefits are retroactive to capital equipment purchases made since July 1, 2004.
Harbin Bearing is located along the Songhua river in Harbin, the provincial capital of Heilongjiang.
With the program in place, Harbin said it now plans to invest another 280 million Yuan in plant and equipment in 2005.
Founded in 1950, Harbin's main factory in Heilongjiang covers 300,000 square meters; the company employs more than 11,000 people. Annual production capacity is approximately 100 million bearings; virtually all are sold under the company's HRB brand.
Harbin is a vertically integrated manufacturer, producing a wide variety of standard, rail, and aerospace-quality ball and roller bearings, including the rolling elements. Harbin Bearing also manufactures automotive wheel hub assembly units, recently completing a 10,000 square meter addition to provide more floorspace for hub assembly production as Chinese auto manufacturer demand continues to rise.
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