Chinese Exports Surge As Firms Look To Cash In On Tax Credits

by Mary Swire, Tax-News.com, Hong Kong

13 January 2004

Chinese exports rose sharply in December as firms rushed to take advantage of tax credits before rebate levels were reduced at the end of last year.

According to customs figures mentioned in a Ministry of Commerce statement, China’s monthly trade surplus has now widened to $5.73 billion as exports leapt over 50% year-on-year to $48.07 billion in December 2003.

The increasing export volume comes on the back of a Finance Ministry announcement last October, which revealed that tax rebates would be reduced by an average of 3% from January 1, 2004.

The changes have seen the export tax credit on clothing, textiles and some electromechanical goods reduced from 17% to 13%, whilst rebates on goods produced by the steel, plastic, chemical and shoe industries have fallen from 15% to 13%. Products in the 13% tax credit bracket such as coal and fertilizers will now receive a rebate of 11%, and some metal products will attract an export credit of 5% (down from 8%).

In addition, tax rebates for some raw materials will be eliminated altogether. This will affect commodities such as crude oil, refined ores, wood, pulp related products and cashmere.

Other changes will see the cost of financing the tax credit system shared between local and central government, although outstanding rebates will be the responsibility of Beijing, the Finance Ministry has decreed.

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