China’s Export Tax Rebate Policy

Excerpt:

Since 1994, the Chinese government has pursued an intricate ‘China’s export tax rebate policy’ in order to calibrate growth in specific sectors of its economy. Simply put, those sectors the government wanted to grow would receive higher tax rebates, whereas the sectors the government wanted to reduce or eliminate would receive less (or no) rebates. However, China’s export volume experienced some sharp declines since the global financial crisis broke out in November 2008. To stabilize its export industry, China substantially raised its formerly-reduced tax rebate rates several times.

China will again be adjusting its rebate policy in 2010, as Ministry of Commerce spokesperson Yao Jian announced at a press conference on June 12. China has cut export rebates three times this year. The Chinese tax bureau in April reduced tax breaks on seven products, including stainless steel and cold-rolled coils. On March 28, China eased import rules for 338 products. And in June, a new wave of scale backs would be introduced affecting around 3,000 different products being exported out of China. This is seen largely as a way to help divert some international anger stemming from the nation’s record surplus. The news wasn’t all bad for China manufacturers however as Beijing also issued a modest list of exports that would continue to enjoy tax-free status, including uncooked peanuts, some artwork, and stamps. The following is a review of Chinas export tax rebate policy and the rationale that governs it.