China to Eliminate Tax Rebates on Certain Export Goods

China will eliminate tax rebates on exports for 406 items starting July 15, 2010, according to a joint notification issued by the Ministry of Finance and the State Administration of Taxation on June 22. This is the first time in 2010 that China adjusted its tax rebate policy since it increased the export tax rebate rates for the seventh time in June 2009.

Ministry of Commerce spokesman Yao Jian said that this adjustment is aimed at restricting the export of "high-pollution, high-energy consumption and resource-dependent" products to accomplish the mission of energy conservation and emissions reduction during the 11th Five-Year Plan period (2006-2010).

Experts hold the same view as Yao and said this move also shows the government's firm determination to promote structural adjustment.

The 406 export goods can be divided into six categories, and include silver powder, alcohol, corn starch, some steel products, nonferrous materials, crop-protection products, medicine, chemical products, plastics and related products, rubber and related products, and glass and related products. These goods used to enjoy tax rebate rates ranging from 5 percent to 17 percent.

Xie Zhenhua, deputy director of China's National Development and Reform Commission, said energy consumption per unit of GDP had dropped by over 14 percent by the end of 2009, far lower than the planned 20 percent by the end of 2010. High-energy-consumption and high-pollution industries have developed rapidly since the third quarter of 2009. Due to the rapid growth of the six energy-intensive industries—thermal power, iron and steel, nonferrous metals, building materials, petrochemicals, and chemical engineering– China's energy consumption per unit of GDP started to rise in 12 regions in the first quarter of 2010, and increased by over 3 percent nationwide from last year.