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China Weighs Incentive To Lift Exports

time2008/10/06

BEIJING -- China's government is considering a plan to raise export-tax rebates on technology, electronic and machinery products, two people familiar with the proposal said, indicating Beijing's intention to bolster export growth as demand from advanced economies weakens.

Both people said the export-tax rebate rate on most of the goods targeted in the plan would rise between four and eight percentage points.

China levies a 17% value-added tax on most products, but refunds varying amounts of that tax on goods that are exported. The proposed increases would take the rebate for some products targeted in the plan to the full 17%, the people said.

China's government often adjusts the size of export-tax rebates for different types of goods when it is trying to encourage or discourage growth in particular industries.

The plan, which requires State Council approval, focuses on electronic and machinery products to which manufacturers add a lot of value, and on items such as home appliances and digital products.

The plan's focus on high-value-added and sophisticated goods suggests Beijing is also using the measure to support exports as a way to restructure the domestic economy, which has grown at a slower pace this year partly because of weakening economic growth in Japan, the European Union and the U.S.

Electronics and machinery made up 58% of Chinese exports last year, and technology products 29%, but some items may be classified under both categories.

Export growth in the first eight months of the year slowed to 22.4% from 25.7% in all of last year, while GDP growth slowed to 10.1% in the second quarter from 10.6% in the first.