Resource Tax Reform First Started In Xinjiang

In May 20th, China Petroleum (601857) (601857) shareholders' meeting gap, chairman Jiang Jiemin confirmed to reporters that at present, the government has decided to start the resource tax in Xinjiang, from the amount of assessment to ad valorem levy. He said: "we hope to make use of the opportunity of resource tax reform to rationalize the resource tax and fee mechanism and consider it with special benefits."

"The current tax and fee mechanism is a bit confusing. The special income point was set at $40. Now, with the appreciation of the renminbi, it has actually been $33, and there has been no special benefit in this price." Jiang Jiemin said.

He said that China's main oil and natural gas resources are concentrated in Xinjiang. If we do not give any benefits to the local authorities, there will be no enthusiasm to cooperate with oil and gas production.

After a lot of calls, the resource tax has finally entered the countdown stage. On May 20th, Jiang Jiemin, chairman of China Petroleum (601857), confirmed the gap between shareholders' meetings. At present, the government has decided that the resource tax will first begin in Xinjiang, and it will be assessed from the quantity and changed to the ad valorem.

According to media reports, before this week's central Xinjiang working conference, resource tax reform is also an important part of this meeting. The oil resource tax is expected to be assessed according to the 5% uniform tax rate.

Resource tax is a kind of tax collected to regulate the differential income of resources and reflect the paid use of state-owned resources. Its main role is to mobilize the enthusiasm of supporting resources development and resource protection by increasing the financial revenue of resources mining areas. At present, China's tax collection mainly includes resource tax, mineral resources compensation, mining royalty and oil special income. In addition, mining enterprises also need to pay a series of administrative fees.

In recent years, although the Ministry of Finance and the State Administration of taxation have repeatedly raised the resource tax of coal, oil and natural gas and molybdenum, manganese ore, rock gold, coking coal and other products, China's resource tax burden is still at a low level.

For the impact of the introduction of the resource tax on related industries, market participants generally expressed caution. For many industries, especially downstream industries, the negative impact is more prominent.

Generally speaking, resource tax reform will increase the price of raw materials and basic products of resources, which will cause the price of upstream production materials to rise, and thus transmit to the downstream products, thus affecting the overall economy in a comprehensive way. However, due to the low elasticity of short-term demand and the high elasticity of long-term demand, although the rising price of resources will cause pressure on prices in the short term, there is little possibility of the overall rise in prices in the long run. {page_break}

Impact of related sectors:

Non ferrous metal plate: in August of last year, the price of some non-ferrous metal resources has been raised. The adjusted tax rate is not very high, and the actual pressure brought by resource tax reform will be less than psychological pressure. At the same time, due to the fact that the cost transfer capability of the non-ferrous metal industry has been strong and is in the boom of the industry, the impact is not expected to be very significant.

Coal plate: resource tax reform plan is expected to have limited impact on coal enterprises. In the government document, it is pointed out that when reforming the resource tax collection scheme, the existing taxes and fees will be cleaned up, so as to lighten the burden of the coal enterprises. In 2010, the macro-economic situation was good. Coal supply and demand is expected to be moderately tight in the balance, and coal enterprises have the advantage of discourse power. Therefore, the added cost is expected to be transferred through raising prices, which has limited impact on the profit margins of coal enterprises. We do not exclude the possibility of further raising the price of coal by means of resource tax reform. The main line of investment is the concept of asset injection; companies that are concerned about the growth of capacity and the rise in sales prices are concerned about the trading opportunities of coking coal resulting from the expected growth of downstream industries. We mainly recommend Xishan coal electricity (000983), Yangxin energy (600348) and Shanxi Coal International (600546).

Electricity sector: resource tax reform, thermal power industry will become the direct transfer of coal prices, facing the greatest pressure. Affected stocks: Guodian power (600795), Guodian power (600886), Huaneng International (600011), Shanghai electric power (600021), Beijing Thermal Power (600578), Guangdong electric power A (000539), etc.

Water resources sector: water grid rises, listed companies benefit. Benefited stock: South China Sea Development (600323), Hongcheng water industry (600461), Qianjiang water conservancy (600283), Wuhan holding (600168), pioneering shares (600008), Zhongshan public utility (000685), and entrepreneurial environmental protection (600874).

Oil plate: resource tax reform or upward impact on the petrochemical industry will be significantly smaller than coal, non-ferrous metals and other industries. First, the petrochemical industry is more vulnerable to the impact of international crude oil prices, compared with the impact of resource tax is very small. Two, if the oil resources tax is further raised, it will inevitably involve the adjustment of windfall profits tax. As a result, the overall cost will not be greatly improved, so the impact will be very small.

Natural gas plate: the most concerned product of resource products is refined oil prices. According to experts, the price of natural gas is much higher than that of oil prices. The amount of resources tax is calculated, if it is changed to ad valorem (the tax rate is more likely to be 3%-5%), it will increase the tax burden of oil companies, but the impact is limited. CICC expects that the possibility of natural gas price reform and resource tax reform will also be introduced this year. The impact of the two reforms will be expected to range from -5.5% to 1.4%. If the natural gas price reform is introduced at the same time, the natural gas price 10%-20% will be partially offset. Benefited shares: PetroChina (601857), Sinopec (600028), Shaanxi Natural Gas (002267), Datong gas (000593) and so on.
　　
This morning, China Petroleum (601857) (601857.SH; 00857.HK) shareholders' meeting was held this morning. Jiang Jiemin, general manager of PetroChina, confirmed for the first time that the resource tax reform will be launched in Xinjiang, and that the oil and natural gas will be changed from the volume assessment to the ad valorem levy. Jiang Jiemin hopes that the resource tax reform will be levied together with the oil special income fund now being collected.

According to the first financial daily, before this week's central Xinjiang working conference, resource tax reform was also an important part of this conference. The resource tax of this oil is expected to be assessed according to the 5% uniform tax rate.

If the pilot end of the comprehensive levy, PetroChina's crude oil output last year was 1.356 million tons. If the oil price per ton is stable at 5000 yuan, and according to the ad valorem rate of 5%, then CNPC will pay 33 billion 900 million yuan a year. PetroChina financial assets department also said that the resource tax reform will bring a significant increase in the cost of enterprises. If adjusted to 5%, the cost of CNPC's resource tax will increase by about 6 times.

As early as March, after the national "two sessions", CNPC has discussed with the Ministry of finance, the NDRC and the General Administration of taxation the details of the resource tax adjustment.

In July 1, 2005, there was a round of increase in resource tax rates for oil and natural gas: crude oil resources tax ranged from 14 yuan / ton to 30 yuan / ton; and the standard of natural gas tax was higher than before, ranging from 7 yuan / 1000 cubic meters to 15 yuan / thousand cubic meters.

Pu Zhizhong, a professor at the school of management at Yangtze University, also believes that China's current oil tax rate, including the paid use of resources, is only about 2% of the oil price. It can not fully reflect the value of oil resources nor give full play to the economic role of the oil resources tax.

"Although China began to levy special oil royalties in April 2006, even if the special income of oil is included in the category of petroleum resources tax, it can not change the situation that China's oil resource tax is too low." Pu Zhizhong thinks.

Resource tax reform has been delayed for several years. Liu Kegu, consultant and former vice president of the National Development Bank, said in an interview with first finance that the first half of this year was a favorable period for the reform of resource tax.

"Xinjiang is likely to become a pilot province for resource tax reform." Lin Boqiang, director of the energy economics research center of Xiamen University, said.

Reporters learned that, after the recent central Xinjiang working conference, the resource tax reform pilot will be pushed out, and Xinjiang will be the most favored pilot province.

Lin Boqiang said that Xinjiang's mineral resources are abundant, but because of the low development rate of mineral resources and the relatively few benefits involved, it is the most suitable province to implement resource tax reform.

Data show that as of 2008, Xinjiang has found 138 minerals, 9 of which rank first in the country and 32 in the northwest. However, due to the limited local processing capacity, most oil and gas and coal resources are transported to the mainland for processing. Xinjiang has never formed a complete chain of mineral resources.

In November last year, the development and Reform Commission, led by the central authorities of finance, taxation, finance and other 40 departments, jointly launched a major investigation into Xinjiang. The development of mineral resources has also become an important part of the survey. After the end of the survey, relevant departments also discussed the implementation of resource tax reform pilot.

Lin Boqiang also said that in the implementation of the current round of resource tax reform pilot, the central government may arrange two to three provinces to jointly pilot with Xinjiang to better observe the results and differences of reform.
Xing Tieying, who came to Xinjiang with his father who repaired the railway, was waiting for the news of the central Xinjiang work conference. He lived in Xinjiang for 51 years and made his business from Alashankou to Rotterdam.

"Xinjiang is rich in resources, which is not inferior to the five Central Asian countries. There is no resources in the inland areas. It is better to develop Xinjiang in overseas search." Xing Tieying, chairman of Xinjiang Eurasian Continental Bridge International Logistics Co. Ltd., has been very busy these days. In his view, Xinjiang is experiencing important nodes.

After last year's ministries' research and the provincial counterparts' support this year, Xinjiang has once again welcomed the important development opportunities. Reporters confirmed that the central Xinjiang work forum was held on 17 June this year.

A day before that, Zhang Chunxian, the Secretary of the Autonomous Region Party committee, held a mobilization meeting before the forum in Xinjiang's Beijing office. All the leading officials from various departments in Xinjiang arrived in Beijing.

"The central Xinjiang work symposium is an internal meeting. How much policy can be released after the meeting is uncertain." A person familiar with the matter told reporters that many of the plans were under discussion, and the central government's support for Xinjiang's development was very strong and determined.

Xinjiang has prepared quite well for the symposium. Since May 4th, Zhang Chunxian and other autonomous region leaders have conducted intensive research on Xinjiang. From the autonomous region's NPC, CPPCC, Xinjiang military region, production and Construction Corps to the Xinjiang Armed Police Corps of the armed police, 10 seats have been held in 9 days to hear the work report.

In the late stage of the investigation, Zhang Chunxian personally held a forum of cadres at the level level. "The Secretary of the Autonomous Region Party committee holds a meeting of cadres at the level level, and we have never met with the grass-roots cadres." A level cadre of the meeting said.

Special zone conjecture

In April this year, the national counterpart supported the opening of Xinjiang, and the 19 provinces' 100 billion capital made Xinjiang stand at the starting point of the "leap forward development".

During the two sessions this year, the reporter received a proposal from a representative of the Xinjiang region, proposed the proposal to set up the Kashi special economic zone of Xinjiang, and suggested that the State Council further expand the opening of Xinjiang and Kashi to the West and incorporate it into the overall strategy of opening the country to the border, and promote the great development of Kashi's economy and society with the great opening up.

The proposal holds that the "China Kashi special economic zone" should be approved as soon as possible, and the state plan should be granted a separate jurisdiction to enjoy special support policies such as industry, taxation, finance, land and foreign trade. Relying on the advanced factors of productivity in the coastal mainland and Urumqi Changji, the northern slope of the Tianshan Mountains and the southern foot of the Tianshan Mountains, the whole country will be exposed to the Central Asian and South West Asia.

According to people familiar with the matter, last November, the national development and Reform Commission, led by the national development and Reform Commission, including a large research group involving nearly forty departments directly under the Ministry of finance, finance and taxation, went to Xinjiang to conduct research. After the delegation returned to Beijing, it had held several meetings by the NDRC to discuss policies and measures to support Xinjiang's development.

Akbar Hupur, director of the National People's Congress and Commissioner of the Kashi District of Xinjiang, suggested that the Kashi special economic zone be approved to enjoy special policies such as industry, taxation, finance, land, foreign trade, and so on. Kashi should be built as an international gateway to the West export processing base and commodity transfer hub, to import energy and scarce mineral resources, and to go out to develop the new Eurasian Continental Bridge for energy resources and international market development.

Prior to the provincial and municipal capital and aid projects planning started, many scholars believe that the possibility of choosing some cities to do the SAR is not very likely.

"It is quite possible to speed up the opening up of Yanbian, integrate resources and engage in some larger border free trade zones." Wei Houkai, deputy director of the Institute of urban development and environment, Chinese Academy of Social Sciences, told reporters. {page_break}

Resource tax reform pilot

"Xinjiang's development without industrial support will become empty talk, and Xinjiang's largest competitive industry is the deep processing of resources and products." Wei Houkai told reporters.

Xinjiang, with its 1/6 land area, is rich in energy and minerals. Data show that as of 2008, Xinjiang has found 138 kinds of minerals. Among them, nine kinds of reserves rank first in the country, and 32 in Northwest China.

For a long time, Xinjiang is the source of China's energy resources. Due to the limited processing capacity, most of Xinjiang's oil, gas and coal resources are transported to the mainland through railways, highways and pipelines. However, Xinjiang has not formed an industrial chain, nor can it lead to the rapid development of local economy.

According to Xing Tieying, ore imported from Kazakhstan and other Central Asian countries is less than half of the Xinjiang area, and most of them are transported inland.

At present, the relevant departments of the State Council are formulating a new ten year package of policies for the western region, including finance and taxation. Because of the abundant resources in Xinjiang, experts believe that Xinjiang may have a breakthrough in resource tax.

Last year, when the ministries and commissions returned to Beijing after investigation and study, combined with the characteristics of Xinjiang's rich natural resources, they discussed the pilot project of resource tax reform. It was also reported that after the two sessions of the NPC, CNPC had discussed with the Ministry of finance, the NDRC and the general Administration of taxation the details of the resource tax adjustment.

Wei Houkai believes that Xinjiang has abundant resources, such as oil, natural gas, coal, non-ferrous metals and so on. The deep processing and comprehensive development and utilization of these resources can even build a resource recycling industrial chain.

"According to our research, the average tax in the western region is higher than that in the eastern region, and the central government's support is further increased. In the past, the discount rate is 15%, can it be reduced to 10%, and some areas in the western part of China can even consider the establishment of a tax free zone." Wei later said.

According to Xing Tieying, the products exported by Xinjiang each year include mechanical and electrical products, clothing and building materials exported to Central Asia and Europe. Xinjiang has become an important node in Asia Europe resource transportation corridor. "Recently, many Wenzhou people came here to invest in the construction of cotton mills. They have already smelled the opportunity of Xinjiang." Xing Tieying told reporters. {page_break}

List of relevant listed companies

Stock name stock code

PetroChina 601857

Sinopec 600028

Kailuan 600997

Xishan coal electricity 000983

Lu'an ring energy 601699

Zijin Mining 601899

Yunnan copper 000878

Chalco 601600

Jinjing technology 600586

Tianwei Bao changes 600550

Orient electric 600875

Shaun 000601

Wuhan holding 600168

Pioneer shares 600008

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