China scraps export tax rebates

Chinese State Council has agreed to the abolishment of tax rebates for 406 exported products. The new policy effective July 15th, includes steel and non-ferrous metals products, fertilizers, in addition to specific plastic, rubber, and glass products, according to the Chinese Finance Ministry in a Tuesday statement. The Ministry has yet to offer an explanation for the policy change.

¡°It is likely this policy¡¯s purpose is to help curb environmental pollution, as these products come from high energy industries,¡± said Edward E. Lehman, Managing Director of Lehman, Lee & Xu. ¡°The move coming so soon after the government¡¯s recent pledge to allow more flexibility with the Chinese RMB exchange rate is a surprise. This will increase production costs, lowering China¡¯s economic advantage, a major reason why the government was concerned over letting the RMB appreciate against foreign currencies,¡± adds Lehman.

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