China to Reduce Tax Rebates on Resource-Intensive and Environmentally-Harmful Exports

Strategic Insights -

Beijing plans to reduce tax rebates on exports of resource-intensive and environmentally-harmful products, reflecting the government's drive to shift the nation away from low-value-added exports. The decision comes despite strong protests from domestic companies and traders. The move is aimed at promoting a trade balance and reducing the country's reliance on exports. "The government wants to see a trade balance. We're not deliberately seeking rising surpluses," said Ministry of Commerce spokesman Chong Quan. The policy change is expected to take effect around September or October, although the exact date has not been confirmed.

Key Takeaways:

  • Tax rebates for exports of resource-intensive and environmentally-harmful products are set to be reduced by an average of 2% to curb over-reliance on low-value-added exports.
  • The policy change is aimed at promoting a trade balance and reducing the country's reliance on exports, according to Ministry of Commerce spokesman Chong Quan.
  • High-tech industries will be exempt from the tax rebate cuts, with their rebates increased instead.
  • The move comes despite strong protests from domestic companies and traders, who fear the impact on their businesses.
  • China is seeking to shift its economy towards higher-value-added industries and promote domestic consumption, which currently accounts for a relatively small share of the country's GDP.
  • The policy change is part of the government's efforts to achieve a more sustainable and balanced economic growth model.
  • The Chinese economy has been heavily reliant on foreign trade, with exports growing at an average annual rate of over 30% since the country's accession to the WTO in 2001.
  • China's trade surplus is set to exceed $100 billion this year, with the country's foreign trade reaching $795.7 billion in the first six months of 2006.

Statistics:

  • United States dollars ($795.7 billion) - foreign trade reached in the first six months of 2006
  • 23.4% - year-on-year growth in foreign trade in the first six months of 2006
  • $61.5 billion - trade surplus in the first half of 2006, up 54.9% year on year
  • $100 billion - expected trade surplus for 2006
  • 30% - average annual growth rate of foreign trade since China's accession to the WTO in 2001
  • 58.5% - proportion of China's total foreign trade generated by foreign-invested, export-oriented processing firms in the first half of 2006

Sources:

  • Caijing magazine
  • Asia Pulse
  • Ministry of Commerce
  • General Administration of Customs (XIC)