China To Reduce Rebates As It Starts To Lead In Exporter List

The Chinese government has decided to reduce its tax rebates on some products as it rises as one of the leading nations in the exporter list. Moreover, the move is part of its effort to resolve its trade surplus record. According to the state news agency, the rebates on goods such as energy, metals, and textiles, could be decreased by 2 percent on average. This strategy would, then, enable China to control its dependence on investment and trade. Likewise, the move would also aid in curbing pollution and in conserving energy in China, which is currently one of the leading nations in the Exporter List.

However, the proposal, which will be implemented either in September or October, is likely to face a strong opposition from several local companies and traders. Yet the Chinese government is determined to implement the changes as it begins to lead in the exporter list and assume more responsibilities in the global trade. Chong Quan, the spokesman of the trade ministry office, was quoted by the Xinhua news agency as saying that China sought for a trade balance and rejected the increase of surplus. That was why it decided to reduce its rebates on some goods.

During the first half of 2006, China's surplus has already risen up to 50% thus amounting to $61.45 billion. Yet not only is the increasing surplus a major problem to China, but it has also been one of the areas of its trade disputes with the United State and the European Union. Both parties have complained that China's rebates enable it to dump low-priced products on their markets thus affecting their local businesses and resulting to the loss of many jobs. Moreover, they have called for the nation to fulfill its duties and responsibilities like the other countries in the exporter list.

The rebate policy was first implemented at a 6 percent level in 1998, the period of the Asian financial crisis. However, the rebates are, currently, at a 15 percent level. Moreover, they have gradually become a problem to the coffers of the Chinese central bank. From 2001 up to last year, China's export rebates rose up to 1.19 trillion yuan ($148.7 billion). Yet the report of China's move to cut its rebates came after it dismissed calls from labor unions for the investigation of its unfair working practices. Several unions have urged President George W. Bush to initiate an investigation regarding the accusations that China was violating the international rules of labor. The labor unions also complained that these malpractices had resulted to the loss of 1.29 million jobs in the United States due to firms outsourcing in the Asian country. However, the Chinese government opposed the requests for investigation stating that the situation was starting to improve considering the rise of wages, as well as the improvement in safety inspections being implemented. The nation has also argued that it is doing its responsibility as a part of the exporter list.

Some analysts said that the request for investigation was an attempt of the labor unions to increase the pressure on the White House ahead of the coming elections. It must be noted that unions have expressed their dissatisfaction over the record high $202 billion trade gap of the US with China. According to them, the increasing deficit is affecting not only the local companies, but also the workers. During the recent years, the demands of Chinese goods in the US have increased due to their cheaper price compared to the domestic products. Yet other nations are urging China to be a fair player in the global trade as it rises as one of the leading nations in the exporter list. At present, the Chinese government has embarked in several changes such as the recent revaluation of its yuan in order to respond to the calls of other trading partners and to fulfill its role as part of the global export list.