China slims tax breaks
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Manufacturing News, Source : The Manufacturer US
Published : 04 Oct 2006 16:35
China attempts to stem deficit, improve global profile
China is slamming on the "tax brakes," supposedly to slow an export deficit. Likely, this is as much a PR move as it is an economic one.
The industries most affected include steel and textiles. Both industries have enjoyed government subsidies in the form of tax breaks since 1985. Steel's break will shrink from 11 to eight percent, textiles' from 13 to 11 percent.
Agence France-Press speculates that this measure is to head off the usual criticism that China undervalues its currency to gain an unfair market share. These tax breaks have contributed significantly to China's export growth, with average breaks as high as 15 percent in periods since 1990.
China made the announcement on September 15, just days before gatherings of the International Monetary Fund and the World Bank, which gatherings were to include the US, China, Japan and several members of the European Union.
The announcement also came as finance ministers from Britain, Canada, France, Germany, Italy, Japan and the US were to meet in Singapore and likely renew calls on China to free up its currency so as to help ease global economic imbalances.
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