Tax rebate cuts tipped to slow export growth
Record trade gap seen easing in second half
Growth in the mainland's ballooning trade surplus will slow in the second half of the year following cuts to export tax rebates, the government said yesterday.
The forecast came a day after the authorities announced the politically sensitive trade gap reached a record high last month, heightening economic tensions between the mainland and key trading partners including the United States. Ministry of Commerce spokesman Wang Xinpei said exporters rushing to ship goods before a July 1 deadline for the reduction and cancellation of export tax rebates had been partially behind the trade surplus surge. On Tuesday, the government said last month's surplus widened by 85.5 per cent year on year to a monthly high of US$26.9 billion.
That brought the mainland's first-half trade surplus to US$112.62 billion, 83 per cent more than the US$61.45 billion a year earlier, and breaking the US$100 billion barrier for the first time for a six-month period.
'We see trade surplus growth declining in the second half,which is what we want,' Mr Wang told a press conference yesterday.
The government has said it wants to cut the surplus and move away from export-led growth.
Over the past year, Beijing has adjusted its tax and rebate policies to discourage energy-intensive, pollution causing, low value-added exports.
This month, the mainland has slashed tax rebates on exports of 2,831 types of products.
The trade surplus has provided more ammunition to critics in the US Congress, who complain that Beijing is deliberately keeping its currency artificially low to give an unfair advantage to Chinese exporters.
The yuan hit a high of 7.5656 against the US dollar in early trade yesterday, its strongest level since Beijing scrapped the yuan's decade-old peg to the US dollar and revalued the currency by 2.1 per cent in July 2005. It has strengthened by more than 7 per cent since then. The government is studying ways to reduce the surplus, including financial measures, Mr Wang said.
Economists will closely monitor trade data for the next two months before deciding whether to revise their full-year forecasts for the yuan.
'Beijing may accelerate yuan appreciation, depending on the July and August trade situation,' said JP Morgan Greater China economist Qian Wang. 'The government will wait and see the impact of the export rebate policy before taking a fresh round of action.'
Ms Wang expected the yuan would appreciate by more than 10 per cent this year, above the market's top-end estimate of 7 per cent.