Recently, it was widely rumored that the Chinese government was about to adjust the export tax and tax rebate on steel and iron products, and that the date for the execution of the measure was being postponed from the previously-predicted June 1 to August 15. However, it has now been made known that during the current Olympic Games China's government will not issue any policy changes of great significance, and, consequently, the so-called "August 15" prediction has turned out to be without foundation.
It must be pointed out that China's government is determined to keep firm control of "high consumption, high pollution and resource products," including steel and iron products. Currently, China's inflation level has declined to some extent, but still remains relatively high. Besides, the PPI has been trending strongly upwards, rising 7.6 percent year on year in the first half of 2008. With a growth rate of eight percent in March, 8.1 percent in April, 8.2 percent in May and 8.8 percent in June, the PPI has been increasing at a rate above eight percent for four successive months. Meanwhile, China's customs issued a research report recently, suggesting further reinforcement of the supervision of steel product exports, in order to prevent them from getting out of control again. In this situation, outsiders predicted that it would not be unusual if the Chinese government increased the export tax and canceled the remaining tax rebate on some products.
However, this year China's international trade has been facing great difficulties, with the growth rate of exports registering a sharp decline. Exports in H1 2008 went up by 21.9 percent year on year, i.e. 5.7 percentage points lower compared with the same period last year. Taking into account the export price increase due to inflation and the depreciation of the US dollar, the growth rate of physical goods exports is even lower. As regards the export situation of finished steel products, in the first half year of 2008 exports totaled 26.94 million mt, down 20.2 percent year on year, while the export value totaled $25.3 billion, up 12.9 percent year on year.
In the above context, the Chinese government is more concerned with giving priority to the steady and rapid growth of exports. The export rebate rate for certain garments and textiles will be raised from 11 percent to 13 percent, and the rebate rate for certain bamboo products will be hiked to 11 percent. Meanwhile, as steel exports are trending downward, export restricting policies are not urgently required.
Since the beginning of this year, some Chinese exporters have added boron to exported steel products in order to avail of a five percent rebate. This came to the attention of Chinese customs in April, and they subsequently initiated an investigation into the matter. However, no substantial measure has been implemented so far by the government, which has only punished some exporters for exporting steel products without alloys in the guise of alloy steels. On the other hand, some exporters continue to sell boron-added steels to the overseas markets.
All in all, the Chinese government is not anxious to see excessively strong volumes of steel products being dispatched abroad by Chinese exporters. A series of steps such as raising steel export taxes, canceling the current export tax rebates and increasing the alloy content in exported steels will be issued when appropriate. It must be emphasized that the measures in question are not necessary at present, and so even the policy makers themselves do not currently know the exact timescale for the prospective implementation of such measures.