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Rebates Removed, Cut to Curb Exports
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The government will eliminate or cut tax rebates for more than 2,800 export items from July 1 - in the boldest move yet to rein in exports since it joined the World Trade Organization in 2001.

The affected items account for 37 percent of all export products, the Ministry of Finance announced yesterday.

Export tax rebates for 553 "highly energy-consuming and resource-intensive" products, such as cement, fertilizer and non-ferrous metals, will be eliminated, the ministry said.

Rebates for another 2,268 products, described as "easy to trigger trade frictions", will be slashed from 8-17 percent to 5-11 percent. They include garments, toys, steel products and motorcycles.

Yesterday's announcement follows the imposition or raising of export tariffs on 142 categories of goods effective June 1. The products include steel billets and non-ferrous metal minerals.

Both steps are part of the policy package designed to control soaring exports and bloating trade surplus.

From January to May, exports surged 27.8 percent year-on-year to US$443.5 billion; and the trade surplus rocketed 83.1 percent to US$85.7 billion, according to Customs statistics.

The huge surplus has aggravated such problems as trade conflicts with other countries and pressures on China to revalue the renminbi, as well as excessive liquidity at home, the ministry said.

Liu Xueqin, a researcher with the Chinese Academy of International Trade and Economic Cooperation affiliated to the Ministry of Commerce, said: "The new policy will restrain exports because it affects a broad range of products."

Domestic producers say they are already feeling the pressure from the export control measures.

"Our steel companies are at threat (of losing foreign markets). But we can understand the overall significance of the policy," Qi Xiangdong, deputy secretary general of the China Iron & Steel Association, told China Daily.

The association predicted earlier that, as a result of the export disincentives, the country - the world's top steel producer - would this year export no more or even less than last year.

Steel exports totaled 43 million tons in 2006, a growth of 110 percent over 2005.

The finance ministry said the new policy will also help slow down investment in fixed assets and reduce over-capacity; and lead to sustainable development.

Many industrial sectors, such as steel, cement and motorcycles, are believed to have excessive production capacity in relation to domestic demand.

(China Daily June 20, 2007)

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