China may cut export tax rebate on resource-intensive products

BEIJING - China may cut tax rebates on exports of some resource- and energy-intensive products seen as harmful to the environment as part of efforts to reduce its growing trade surplus, state press said on Sunday.

By (AFP)

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Published: Sun 23 Jul 2006, 7:19 PM

Last updated: Sat 4 Apr 2015, 3:15 PM

Rebates on products such as textiles, iron and steel, will be slashed by an average of two percent but they will be increased for high-tech industries, Xinhua news agency said.

Xinhua said the move reflects government efforts to shift emphasis away from low value-added exports and comes as the nation’s trade surplus is expected to rise to 100 billion dollars this year.

“The Chinese government wants to see a trade balance. We don’t deliberately seek a rising surplus,” Xinhua quoted Chong Quan, Ministry of Commerce spokesman, as saying.

China chalked up a 61.5 billion dollar trade surplus in the first half of this year, up 54.9 percent year-on-year, according to government figures.

Introduced in 1985, tax rebates for exporters have made Chinese products more competitive on the international market.

Following the 1998 Asian financial crisis, China raised its average export rebate from 6.0 to 15 percent. The export growth rate promptly doubled and China became the third-largest commodity trader in the world, in terms of gross value, after the United States and Germany, the report said.

However, annual export rebates have now become a burden on central finances. Between 2001 and 2005, aggregate export tax rebates reached 1.19 trillion yuan (148.7 billion dollars), nearly 3.8 times as much as for the period from 1996 to 2000, according to official statistics.

In addition to this financial burden, the rebate system conflicts with China’s new determination to attack pollution and conserve energy.

“Export rebates for high energy-consuming, high-polluting and resource-intensive products should be stopped,” the report quoted Fu Ziying, assistant to the Minister of Commerce, as saying.

It is now expected that China will cut tax rebates by an average of two percent for sectors such as textiles, metallurgy, iron and steel. Only high-tech industries will avoid the knife and will see their rebate increased, Xinhua said.

The as-yet unreleased policy is scheduled to take effect around September or October despite strong protests from domestic companies and traders, the report said.

Moreover, reducing export rebates may help ease pressures to revalue the yuan, Xinhua said.

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