China Raises Export Tax Rebate Rate for the 7th Time since August 2008

China has raised export tax rebate rate on some products since June 1, 2009. The uplift, involving China's competitive products, labor-intensive products, high-tech products and deeply processed products, covers goods under over 2,600 10-digit duty paragraphs. This is the third time that China has raised export tax rebate rate this year, and is the 7th uplift of the rate since August 2008. The uplift this time is expected to generate additional tax refunds of approximately RMB25.2 billion.

The detailed contents of the policy include: raising export tax rebate rate for some competitive products such as deeply processed farm produce, pharmaceutical product, steel products, etc: raising that for deeply processed products such as tinned foods and fruit juice etc from 13% to 15%, raising that for cornstarch and alcohol from 0 to 5%, raising that for alloy steel profiles and cold-rolled stainless steel etc from 5% to 9% (for products currently subject to zero export tax rebate rate, no adjustment is made in principle except for very few specific products); raising that for labor-intensive products such as suitcases and bags, shoes and caps, toys, furniture and etc: raising that for suitcases and bags, shoes and caps, toys, furniture etc from 13% to 15%, raising that for part of plastic, ceramic and glass products from 11% to 13%, raising that for small hardware products such as scissors etc from 5% and 11% to 9% and 13% respectively; raising export tax rebate rate for high-tech products such as home electric appliance, single-crystal silicon ingot, and insulin etc.

It is learned that this uplift of export tax rebate rate is a specific policy worked out in response to the guidelines set down by the executive meeting of the State Council dated May 27, 2009. The guidelines specify that export taxation policies shall be perfected, export of competitive products, labor-intensive products and high-tech products shall get sustained support, and export of highly energy consuming products, highly polluting products and resources-related products shall be kept under strict control. In principle, no adjustment will be made to the export tax rebate rate for highly energy consuming products, highly polluting products and resources-related products. Meanwhile, the policy has combined the levels of export tax rebate rate. Two levels, i.e. 11%, 14% are eliminated, reducing the number of export tax rebate rate levels from 9 to 7.

The global financial crisis has dampened China's external demand and given rise to constant decline in China's export. From January to April this year, the total value of China's import and export registered USD599.41 billion, dropping 24.3 percent year-on-year. Specifically, export fell by 20.5 percent to USD337.42 billion; import dropped by 28.7 percent to USD261.99 billion; The accumulative trade surplus amounted to USD75.43 billion, rising 32.4 percent year-on-year, with a net growth of USD18.45 billion.

In response to the foreign trade situation, the growth rate of export tax rebate started to slide in contrast with the substantial rise in the growth rate in Q1 of 2009. In April, China provided export tax rebate in total amount of RMB32.89 billion (excluding the tax exemption & deduction and treasury adjustment, the same below), a rise of 11.9 percent year-on-year and a decline of 9.3 percent on a month-on-month basis. During the January to April period, the nation provided export tax rebate in total amount of RMB135.862 billion, rising 16.8 percent year-on-year.