China’s economy has been behaving like a race car on a bumpy track: sometimes too fast, sometimes too hot. For the corporate passengers, the most dreadful thing is not knowing when and where economic policy will turn. With these unpredictable circumstances, enterprises may end up finding themselves deeply trapped in the mire.

Starting on July 1 this year, the government began making drastic changes to the export tax rebate mechanism, which involves nearly three thousand items accounting for 37% of the products eligible for customs tariffs. The adjustment is unprecedented in terms of force and scale. A large number of export-oriented enterprises’ futures are now bleak.

To encourage exports, China has utilized the export tax rebate for over twenty years. This practice leads to the result that China’s economic growth and corporate operations become heavily reliant on export. However, in comparison to previous changes, this time there has been no transition period. Enterprises have to make up the rising costs themselves. According to predictions by industrial analysts, a host of medium and small enterprises in textile, leather and toy processing industries are severely threatened, while export-oriented industrial companies with high energy consumption and pollution levels will be deprived of hefty profits.

Of course, adjustments to the export tax rebate were necessary when one considers the state of the Chinese economy in the international environment. But the Chinese government needs more perspective when predicting macro-economic trends, and it should allow a grace period when new policies are introduced.

The Chinese government’s decision-making process has changed a lot, especially when it was deciding whether to cancel the interest tax and whether the People’s Bank of China (PBOC), the central bank of China, should make further adjustments to the interest rate. Officials from the PBOC have hinted at the possibility of an increase of interest rate on a few different occasions.

As for the interest tax, the Standing Committee of the National People’s Congress will authorize the State Council to deliberate on suspending the interest tax on bank deposits or reducing individual income tax. This would help to adapt to China’s latest socio-economic development.

In that way, controversial legal procedures may be avoided during major tax adjustments.

Economic regulations are not mysterious, and most of the time, it is necessary for government officials to think from the perspective of an enterprise. If the decision-making process is made transparent, enterprises will be able to make clear predictions and adjust their operational strategies, and thus avoid the market risks arising from changing policies.