China Raises Tax Rebates to Shore up Exports

China raised export tax rebates on more than 2,600 items, including processed farm products, machines, shoes, hats and toys, as of June 1, the Ministry of Finance (MOF) announced Monday.

This is the seventh time that the nation raised tax rebates since last August as to shore up exports amid global economic downturn.

A ministry official, Liu Shangxi, told Xinhua the latest rebate increase reflected the government's efforts to spur the economy by combining domestic consumption and export industry.

"China's exports still face difficulties in the short term. The tax rebate increase would help exporters reduce costs and shore up exports," he said.

According to a notice jointly announced by the ministry and the State Administration of Taxation, tax rebates on TV transmitters, sewing machines were raised to 17 percent, and that on canned food, juice, shoes, hats and toys were up to 15 percent.

Tax rebates on plastic, porcelain, glass and aquatic products were lifted to 13 percent, steel products, including scissors, to 9 percent and cornstarch, alcohol to 5 percent.

Yet the ministry did not provide previous tax rebate rates.

A researcher with the Ministry of Commerce, Wang Zixian, said stable exports would play a fundamental role in maintaining economic growth, improving resistance against risks and ensuring employment.

"In short term, exports may play a less important role in driving up the economy. However, its position as a core for economic growth will not change," he said.

China has adopted a series of measures to shore up exports since the financial crisis broke. It has raised export tax rebates seven times since last August. The overall tax rebate rate now stood at 12.4 percent.Apart from tax rebates, it has also extended more than 6 trillion yuan (878 billion US dollars) in loans in the recent half year to aid small- and medium-sized companies to expand into the international markets and establish distribution channels in emerging markets.

Statistics showed that China's exports fell 24.3 percent in the first four months this year. But in April alone, the decline rate was 1.9 percentage points slower than the first quarter. The month-on-month figure in April was 10.4 percentage points higher.

Exports of textiles and garments began to rise during the recent two months, indicating the decline in exports might have bottomed out.

An executive meeting of the State Council, or Cabinet, late last month announced more policy support, including expanded coverage of export credit insurance, preferential taxes and more financing access measures to help exporters tide over the economic downturn.

Meanwhile, the government has been trying to improve the industrial structure and upgrade those export-oriented industries.

The ministry has stated it would increase rebate rates on those high-tech and high-value-added industries, while eliminating tax rebates on those which consume too much energy and discharge pollutants.

An economy professor at the Renmin University, An Tifu, said the increased tax rebates on different items showed the nation's commitments to upgrade industries, as well as its intention to increase exports of labor-intensive and high-tech products.

However, analysts held foreign trade would not bottom out in short term. Apart from uncertainties on the world economy, worsening financing environment, trade protectionism and devaluation of foreign currencies would all add risks on the foreign trade.

Liu said because of the limited role of tax rebate in spurring the economy, the nation should upgrade industrial structures in the long term to drive up the economy.

"In addition to supporting exports, the government should make more efforts to spur domestic consumption, increase income and expand public consumption," he said.