China VAT rebates lowered
July 13, 2010 by Jules
July 15 rebate scrap creates rush for ports
China will remove export tax rebates for six categories of goods including some steel products, starting from July 15, as the government's first policy adjustment in foreign trade since the financial crisis.
The Ministry of Finance and the State Administration of Taxation had reported on June 22 that export tax rebates would be scrapped for some steel products, non-ferrous metals, corn starch and chemicals.
The rebates cover 406 tax codes in total, with most of the products affected by the adjustment in heavy pollution and emission industries.
Some of the affected products had enjoyed up to 17 percent in tax rebates (ie, full rebate) following policies enacted after the financial crisis in an aim to boost exports. In 2009, China witnessed a 16 percent slump in exports, with the export tax rebate topping 648.7 billion yuan, up 10.6 percent year-on-year.
China has set reduction targets for per capita GDP of energy consumption at 20 percent during the 2006 to 2010 period. Between 2006 to 2009, China's per capita GDP of energy consumption was reduced by 14.38 percent, leaving a 5.62 percent reduction goal for 2010. But in the first quarter this year, the nationwide per capita GDP of energy consumption actually increased by 3.2 percent.
In May, Wang Jun, deputy minister at the Ministry of Finance, said, "China will push forward its policy to scrap export tax rebates gradually on heavy polluters and high energy consumption products, and seek a stable growth path for exports by optimizing export structure."
But the recent removal of some export tax reports are not seen as a wholesale exit of trade stimulus policies as the 406 types of products only address a small portion of China's exports.
In the meantime this has created a predictable rush for the exits. There is a good chance part of the eye popping 44% increase in the US trade deficit with china in June was due in no small part to Chinese exporters and US importers preparing for this adjustment.
In: Market News