In a recent move by Chinese government to support their trade sector, a cut in export tax was announced on two products namely steel billets and pig iron.
The export tax has been lowered to 20% on billets and 10% on pig iron against the current rate of 25%. This rate will be effective from Jan’2016.
China have exported about 101.7 MnT of steel products in 11 months of 2015 which is 22% higher than the previous year. US and Europe have already accused China of dumping cheap steel products thus aggravating supply glut.
However experts believe that this tax cut on billets wont make much difference as billets from China are typically declared by Chinese mills and trading companies as alloy square bars (finished steel) in order to avoid export tax of 25% and to enjoy 13% export tax rebate allowed on finish steel.
This loophole has allowed Chinese companies to secure overseas orders for their billets at a time when local demand began to falter amid domestic steel oversupply and a slowing economy.
China is also likely to cut import tax rate on advanced equipment, energy raw materials and some components. While this will benefit China’s industrial sector, it is a cause of concern that using improved technology the excess production from China will be sent abroad.
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