China to Reduce Tax Rebates on High-Energy Consuming Exports

China's government aims to reduce its tax rebates on high-energy consuming, resource-intensive, and environmentally-harmful products by an average of 2% to encourage domestic consumption and reduce trade surpluses. According to officials, the new policy reflects the government's efforts to shift emphasis away from low-value-added exports and promote the development of high-tech industries. The move is expected to impact sectors such as textiles, metallurgy, and iron and steel, with China's high-tech industries exempt from the rebate cuts.

The Chinese government has been taking steps to address its large trade surplus, which has been a major concern for policymakers. In recent years, exports have contributed significantly to China's economic growth, but the country's low domestic consumption has hindered its ability to sustain economic development. To address this issue, China's policymakers aim to spur domestic consumption by increasing consumer purchasing power.

Key Takeaways:

• China will reduce tax rebates on high-energy consuming, resource-intensive, and environmentally-harmful products by an average of 2%.
• The new policy is expected to impact sectors such as textiles, metallurgy, and iron and steel, with high-tech industries exempt from the rebate cuts.
• High-tech industries will continue to receive increased export rebates, while other sectors will see a reduction in their rebates.
• The move is part of China's efforts to shift emphasis away from low-value-added exports and promote the development of high-tech industries.
• China's policymakers aim to spur domestic consumption by increasing consumer purchasing power and reducing trade surpluses.
• The country's trade surplus is expected to exceed $100 billion for the year, with the majority of the surplus driven by processing trade with multinational companies.
• China's export rebates have been a burden on central finances, with aggregate export tax rebates reaching 1.19 trillion yuan between 2001 and 2005.
• Reducing export rebates may help ease pressures to revalue the Renminbi, the Chinese official currency, and alleviate pressure on the central government's finances.

Statistics:

• China's foreign trade grew at an average annual rate of over 30% in the five years since the country's accession to the WTO.
• In the first six months of 2006, China's foreign trade reached $795.7 billion, up 23.4% year on year.
• China's trade surplus was $61.5 billion in the first half of the year, up 54.9% year on year.
• China's trade surplus is expected to exceed $100 billion for the year, with the majority of the surplus driven by processing trade with multinational companies.
• Aggregate export tax rebates reached 1.19 trillion yuan between 2001 and 2005.
• Reducing export rebates by 2% is expected to save the central government around 2.4 billion yuan per year.

Sources:

• "China to Reduce Tax Rebates on High-Energy Consuming Exports" by Asia Pulse, July 24
• "China's foreign trade reaches $795.7 billion in first six months of 2006" by General Administration of Customs, 2006
• "China's trade surplus reaches $61.5 billion in first half of 2006" by General Administration of Customs, 2006
• "China's accession to WTO brings significant growth in foreign trade" by Ministry of Commerce, 2005
• "China's rebates for export are a burden on central finances" by Caijing magazine, 2006