Growth in exports to slow as tax rebates cut

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Last updated at: (Beijing Time) Tuesday, January 13, 2004

Growth in exports to slow as tax rebates cut

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China's exports grew 34.6 percent year-on-year to US$438.4 billion in 2003, the fastest pace since 1980, according to the Ministry of Commerce. Analysts, however, expect a slower growth in exports this year due to a high base in 2003 and a cut in tax rebates which started on January 1.

The country's trade surplus narrowed by 16.1 percent to US$25.6 billion last year amid surging imports which grew a record 39.9 percent to US$412.8 billion, the ministry said.

Economists say the record exports growth in the fourth quarter was mainly responsible for boosting the final year export figure. They attributed the growth to a rush to ship more goods abroad before the tax rebates were cut.

"Exports growth will slacken as a result of the cut in tax rebates," said Li Huiyong, an analyst with Shenyin & Wanguo Securities Consulting Co Ltd. "The trade surplus will further shrink this year as growth in imports will continue to outpace that of exports, which is a trend in the coming years."

China cut export rebates by 3 percent to an average 13 percent on January 1, which is widely believed to lessen the competition posed by labor-intensive goods such as textiles, shoes and toys.

Imports, on the other hand, will further boom as domestic demand rises and tariffs are further lowered, Li added.

"China's rapid economic development needs more raw materials, high-tech equipment and resources that the country is short of," he said.

Li predicted China's trade surplus this year is expected to be over US$5 billion.

In a milder estimate on the trade balance, the State Information Center, a government think tank, said in a report last month that China's trade surplus will narrow by US$6 billion, or 24 percent, to about US$19 billion this year.

The report said growth in exports and imports will ease to about 18 percent this year mainly thanks to a high base in 2003.

The report also cited rising trade barriers against Chinese exports as a reason for the narrowing trade surplus.

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