China announced wide-ranging revisions to its tax rebates regime for exports
on Thursday, a long-awaited move aimed to cut its foreign trade surplus and
improve its industrial structuring.
The changes, which took effect on Friday, include tax rebates on
glass, cement, textiles and cigarette lighters decreased to 11 per cent from 13
per cent.
Textile exports hit by rebate cut
Rebates for steel products would be cut to 8 per cent from 11 per cent and
those for some non-ferrous metals would fall to 5, 8 or 11 per cent from 13 per
cent, the Ministry of Finance said in a statement on Thursday without specifying
the metals involved.
The widely expected move "is one of the measures taken this year in line with
the State Council's macro-economic controls," the statement said.
"It will help optimize the industrial and export structure and maintain
balanced export growth."
Rebates on non-metal minerals such as coal and natural gas would be scrapped,
a move apparently aimed to meet surging domestic demands by discouraging their
export.
"As domestic demand for natural resources and energy has soared in recent
years in order to power the strong economy, the removal of tax rebates on those
commodities makes great sense," said Han Meng, an economist with the
Beijing-based Chinese Academy of Social Sciences.
Tax rebates on heavy machinery, bio-pharmaceutical products, some IT products
and other items would instead increase to 17 per cent from the current 13 per
cent, an arrangement aimed to encourage exports in those sectors and help
improve the industry's structuring.
Enterprises, according to the policy amendment, would be given a three-month
transitional period to adapt to the tax changes.
The country has long used tax rebates as a policy incentive to encourage
exports. However, the mounting trade surplus in recent years has led some
economists and government ministries to call for a re-evaluation of the policy.
In August, China's trade surplus hit US$18.8 billion for a fourth straight
monthly record.
Fuelled by the surging foreign trade surplus, the mounting foreign exchange
reserve, which stood at US$954 billion by the end of July and is set to exceed 1
trillion soon, is putting great pressure on the government as trade frictions
are on the rise.
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