[Industry Alert]China to raise tax rebate for machinery products

China will increase the export tax rebates for some machinery products as of Jan. 1, 2009, in a bid to alleviate cost burdens on exporters, the country's taxation watchdogs said Monday.

The rebate hikes will involve 553 types of high-tech and high value-added mechanical and electrical products, the Ministry of Finance(MOF) and the State Administration of Taxation announced.

Export tax rebate rates for industrial robots and inertial navigation systems for aviation use will be increased to 17 percent, from 13 percent and 14 percent respectively.

The rebate rates for exported motorcycles and sewing machines will rise to 14 percent. Their current rebate rates stand at 11 percent and 13 percent respectively.

"The move will help ease the sufferings of Chinese exporters and boost the country's confidence in fighting the financial crisis," the MOF said in a statement.

It was China's fourth rebate hike on exported products this year, and one of several government's measures to counter the global economic downturn that has dampened foreign demand.

The most recent increase took effect on Dec.1, covering 3,770 items of labor-intensive, mechanical and electrical products, or 27.9 percent of the country's total exports.

The previous two rebates were made in August and November.

Official data showed China's November exports declined year-on-year by 2.2 percent to 115 billion U.S. dollars, the first monthly decline since June 2001. Before that, export growth slowed from 21.5 percent in September to 19.2 percent in October.

China levies value-added tax on most products, but refunds varying amounts of that tax on goods that are exported. The government usually adjusts the size of export tax rebates for different types of goods when it is trying to encourage or discourage growth in particular industries.