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Mon, Jul 24, 2006 - Page 10 News List

Beijing may act to curb trade surplus says official agency

AFP , 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 yesterday.

Rebates on products such as textiles, iron and steel, will be slashed by an average of 2 percent but they will be increased for high-tech industries, Xinhua news agency said.

Xinhua said the move reflects efforts to shift emphasis away from low value-added exports and comes as China's trade surplus is expected to rise to US$100 billion this year.

"The Chinese government wants to see a trade balance. We don't deliberately seek a rising surplus," Xinhua quoted Chong Quan (崇泉), a Ministry of Commerce spokesman, as saying.

China chalked up a US$61.5 billion 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 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 the report said.

However, annual export rebates have now become a burden on central finances. Between 2001 and last year, 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.

The rebate system also conflicts with China's new determination to attack pollution and conserve energy.

"Rebates for high energy-consuming, high-polluting and resource-intensive products should be stopped," the report quoted Fu Ziying (傅自應), assistant to the minister of commerce, as saying.

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

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