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China to adjust export tax rebates

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The State Administration of Taxation (SAT) will slash export tax rebates to rein in the surging exports of resource-intensive products, the Shanghai Morning Post reported on Wednesday.

The cuts mainly target energy-consuming and resource-intensive industries, especially those causing severe damage to the environment, a SAT official surnamed Chi said.

Declining to specify the range of the adjustment and the sectors involved, she said that only a few industries would find their tax rebates increased.

The newspaper pointed out however, an average drop of two percent was possible in the tax rebates for sectors like textiles and metallurgy as well as iron and steel, while the new high-tech industries would find their rebate rates raised.

The export rebate mechanism, enacted in 1985, has long been used to stimulate the country's exports. To fend off the negative influences of the Asian financial crisis, China raised its average export rebate rate from 6 percent to 15 percent in 1999 and later lowered it by an average of 3 percent on October 13, 2003.

Given the country's 900-billion-US-dollar foreign exchange reserves, the high-rebate system has actually intensified the financial burden on the government coffers.

"A downward adjustment will help rein in the country's surging exports and narrow foreign trade surplus," said Liu Xiaochuan of Shanghai University of Finance and Economics.

He said that restricting the export of energy-consuming and resource-intensive products was an important step in dealing with China's severe energy shortfall.

Textile expert Fan Min held that rebate cuts would not benefit domestic companies in the short term as their profit margins would be narrowed.

He said that companies engaged in low value-added textile and attire products would be affected most and therefore need to speed up their technical innovation to compete on the world market.

Between 2001 and 2005, the aggregated export tax rebates reached 1.19 trillion yuan, nearly 3.8 times as much as the period from 1996 to 2000, official statistics revealed.


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