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Beijing (AFP) June 23, 2010 China has announced it will remove tax rebates on some exports next month in a bid to rein in overcapacity, a move analysts say could ease trade tensions ahead of a G20 summit. Export tax rebates on 406 goods including some steel products, non-ferrous metals, corn starch and chemicals will be scrapped from July 15, the Ministry of Finance said in a statement posted on its website Tuesday. The move is intended to reduce excess capacity in the sectors by discouraging exports and comes after Beijing said last week it would ban any new capacity expansion plans in the steel industry until the end of 2011. Concerns about overcapacity are rising after China powered out of the global crisis on the back of a 586-billion-dollar stimulus package and state-sanctioned bank lending that nearly doubled loans in 2009. Analysts said the move Tuesday was the first time China had removed stimulative tax measures for exports since the outbreak of the crisis in September 2008, as the country's foreign shipments stabilised this year. They noted that Chinese steelmakers and other raw-material producers expedited shipments this year -- with steel exports tripling last month year-on-year -- in anticipation of a potential exit of favourable tax policies. The move could temper tensions with major trade partners including the United States, which has imposed punitive duties on various China-made steel products, citing unfair subsidies, the analysts said. "The cut of export tax rebates, together with an appreciating RMB (the yuan) and a coming slowdown of export growth going forward, could help ease China's trade tensions with the US," Bank of America Merrill Lynch analysts said in a research note. Beijing vowed at the weekend to make the yuan more flexible and has allowed the Chinese currency to float more freely in the past few days, a step widely seen as a bid to head off rancour at this weekend's G20 summit.
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