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China cancels discount loans for exporters

China cancels discount loans for exporters

BEIJING – China said yesterday that it was rescinding with immediate effect a rule that had given qualified exporting firms discounted lending rates, its latest step to remove preferential treatment for exporters.

China is under pressure, especially from the United States, to take steps to trim its huge trade surplus, something Beijing itself has increasingly said it wants to do as part of efforts to rebalance its economy. While much of that criticism has focused on the value of the yuan, which is widely considered to be undervalued, US officials have increasingly taken aim at what they see as unfair subsidies China offers to industry.The notice, published on the Web site of the People’s Bank of China (www.pbc.gov.cn) yesterday but dated February 28, came hours after publication of a draft law scrapping a range of preferential tax rates and tax breaks for foreign manufacturers, many of whom produce goods in China for export overseas.That law, expected to be passed when the annual session of parliament closes next week, would set a unified income tax rate of 25 per cent for foreign and domestic firms.Many foreign firms now pay 15 per cent, while domestic ones pay 33 per cent.The central bank, together with the foreign exchange regulator, the commerce ministry and the tax administration, said in the notice that the rule – which dates back to 2000 – would be cancelled as of yesterday.The statement provided no other details.The regulation in question gave some large exporters access to discounted loans and was one of the rules that drew the ire of the US administration, prompting it to file a complaint with the World Trade Organisation last month over China’s subsidies.Nampa-ReutersWhile much of that criticism has focused on the value of the yuan, which is widely considered to be undervalued, US officials have increasingly taken aim at what they see as unfair subsidies China offers to industry.The notice, published on the Web site of the People’s Bank of China (www.pbc.gov.cn) yesterday but dated February 28, came hours after publication of a draft law scrapping a range of preferential tax rates and tax breaks for foreign manufacturers, many of whom produce goods in China for export overseas.That law, expected to be passed when the annual session of parliament closes next week, would set a unified income tax rate of 25 per cent for foreign and domestic firms.Many foreign firms now pay 15 per cent, while domestic ones pay 33 per cent.The central bank, together with the foreign exchange regulator, the commerce ministry and the tax administration, said in the notice that the rule – which dates back to 2000 – would be cancelled as of yesterday.The statement provided no other details.The regulation in question gave some large exporters access to discounted loans and was one of the rules that drew the ire of the US administration, prompting it to file a complaint with the World Trade Organisation last month over China’s subsidies.Nampa-Reuters

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