Citigroup says stronger economies mean China will suffer only slightly The central government's recent move to reduce export rebate rates will trim China's export growth by one percentage point next year, United States investment bank Citigroup Global Markets forecast. However, a stronger global economy in the fourth quarter through to next year will augur well for China's export sector, the investment bank's Greater China economist Huang Yiping said yesterday. The central government earlier this week announced an average 3 per cent cut in value-added tax (VAT) rebates for exporters from January. China has offered VAT rebates of as high as 17 per cent, depending on the industry. The latest cuts are seen as a move intended to alleviate international pressure for a yuan revaluation to reduce China's trade surplus. It will further reduce the government's fiscal burden at a time when it has already accumulated 300 billion yuan (HK$281 billion) of back payment for such rebates. George Leung Siu-kay, HSBC's chief economist for Greater China, expected a greater impact from the rebate reduction. He said China export growth would slow by a few percentage points next year, partly because of the increased cost. 'The export growth next year will also be compared with a high base - the growth is strong this year. But the final result will very much depend on the US economy. But demand seems to be stable,' Mr Leung said. However, Mr Huang said the impact would be insignificant: 'Our modelling exercise suggests it will probably [raise] export growth by one percentage point next year. 'You will probably see much stronger export numbers in the fourth quarter this year because lots of exporters might want to rush out their products before the end of the year so they can claim relatively high rebates on some products. 'Then you may see [slightly] lower numbers in the first quarter next year.' Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council said shippers would send out inventories before the rebate cut came into effect on January 1. But the rise in cargo flow in the next two months would not be significant as it took time to place new orders, he added. Mr Huang said sectors less hard hit by the VAT rebate cuts, such as electronics, medical instruments and telecommunication equipment, would probably outperform others in exports. Although bulk exports are the most affected segment, shipping lines expect the growth momentum in China to continue despite a short-term disruption in exports. China's exports jumped one-third year on year in the first seven months to US$228.41 billion. Citigroup's head of China Research Xue Lan said: 'The reduction is a good thing from a long-term perspective. The Chinese economy needs to move in the direction with less and less reliance on government support. 'The reduction will have a minor impact [on companies]. Secondly, it is good to give companies some pressure and a chance to compete when they still enjoy some government protection.' Corporate earnings that beat market expectations will sustain the rally of H shares, with a positive outlook for the next six to 12 months, Ms Xue said. Anhui Conch Cement, the mainland's largest cement maker, yesterday led the H share charge to report upbeat third-quarter earnings.