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.