"Since a 3 percentage point reduction on value-added tax (VAT) rebates will force some Chinese exporters to increase prices to protect their margins, it can be seen as an effective 3 percent revaluation of the currency," the HSBC said in a written statement, adding that most Chinese exporters should succeed in passing on the extra charges to customers.
The policy will save China an annual fiscal cost by 50 billion yuan to 60 billion yuan while expecting the VAT tax cut to further lower China's export growth by 3 percent to 5 percent next year to an estimated 16 percent, HSBC said.
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