23 June 2010 09:12 [Source: ICIS news]
SHANGHAI (ICIS news)--China's move to cancel tax rebates on 406 products, including some chemicals, from 15 July could squeeze exporters’ margins but will help to shift the focus of the economy to domestic consumption from heavy reliance on exports, analysts said on Wednesday.
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In addition to focusing on domestic consumption,
For instance, butadiene rubber (BR) and acrylonitrile-butadiene rubber (NBR) which enjoyed a 5% export tax rebate would now be taxed, according to the ministry’s announcement.
While ethanol exports too would no longer enjoy tax rebate cuts, domestic producers were unfazed by the ruling as there were hardly any exports of the material, sources said.
"They probably reduced rebates to stem ethanol exports, because it [ethanol] is extracted from agricultural sources such as corn and tapioca. The government has a protection policy [concerning] land use for food," said a trader.
Another concern was that once the export rebates were removed, there would be excess material available in the local markets, thereby weighing down domestic prices of these goods, analysts said.
This is the first time China has ended export rebates on some items. It had increased tax rebates for exports seven times since August 2008 in the wake of the global financial turmoil.
Additional reporting by Dolly Wu and Heng Hui
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