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China May Cut Export Tax Rebate On Resource-Intensive Products

As part of efforts to reduce its growing trade surplus, China may cut tax rebates on exports of some resource-and energy-intensive products seen as harmful to the environment, state press said July 23.

Rebates on products such as textiles, metallurgy, 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. 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.

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 this year. China chalked up a $61.5 billion trade surplus in the first half of this year, up 54.9% 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% to 15%. The export growth rate promptly doubled and China became the third-largest commodity trader in the world, in terms of gross value, after the U.S. 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 (US$148.7 billion), 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.

Copyright Agence France-Presse, 2006

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