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Gov't Plans Export Tax Rebate Slash
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China will reduce tax rebates on exports of resource-intensive and environmentally-harmful products, officials say.

An as-yet unreleased policy is scheduled to take effect around September or October, despite strong protests from domestic companies and traders, according to Caijing magazine.

The move reflects the government's drive to shift the nation away from low-value-added exports.

"The government wants to see a trade balance. We're not deliberately seeking rising surpluses," said Ministry of Commerce spokesman Chong Quan.

Introduced in 1985, tax rebates for exports have made Chinese products more competitive on the international market.

But it is now expected rebates will be cut by an average of two percent for products such as textiles, iron and steel. Only high-tech industries will avoid the cuts  their rebate is being increased.

"Export rebates for high energy-consuming, polluting and resource-intensive products should be stopped," said Fu Ziying, assistant to the Minister of Commerce.

Booming exports have contributed significantly to the Chinese economic miracle.

In recent years, the cart of the Chinese economy has been hauled by the two "strong horses" of investment and foreign trade, while the "weak donkey" of domestic consumption totters in the middle.

To sustain the steady development of the national economy, policymakers aim to spur domestic consumption by increasing consumer purchasing power.

The strategy could help rein in over-investment, ease pressure on the renminbi and dissuade foreign anti-dumping lawsuits which result from the mammoth trade surplus, industry officials say.

In the five years since China's accession to the WTO, the country's foreign trade has grown at an average annual rate of more than 30 percent.

In the first six months of 2006 foreign trade reached US$795.7 billion, up 23.4 percent year on year. China chalked up a trade surplus of US$61.5 billion in the first half of this year, up 54.9 percent year on year, according to statistics from the General Administration of Customs.

On this basis, China's trade surplus is set to exceed US$100 billion this year, industry officials say.

In the first half of this year, foreign-invested, export-oriented processing firms generated total foreign trade of US$465.3 billion, up 25.8 percent on the same period last year, and accounting for 58.5 percent of China's total.

(China Daily July 24, 2006)

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