Semi-manufactured goods

By increasing export tariffs and lowering export rebates in 2005, the Chinese government enjoyed some success in curbing exports of high energy-consuming, high-polluting and resource-intensive products: coal exports dropped 12.7 percent, coke exports dropped 10.7 percent, billet exports dropped 35.6 percent, and exports of non-forged aluminum dropped 20 percent year on year in the first six months of this year, according to the National Bureau of Statistics.

However, to get round such restrictions, many Chinese businesses found a new strategy: they began processing materials slightly -- not completely -- for export. Thus the bulk of Chinese exports moved from resource-intensive products to preliminary processed products and semi-finished products.

China's exports of semi-finished aluminum products, for instance, surged 57 percent year on year to more than 400,000 tons in the first five months of this year, according to Chinese Customs statistics. The new adjustment reported in Caijing therefore targets semi-finished resource-intensive products with low added value, and for good reason.

"We must not go on selling resource-intensive materials to the overseas market," said Zhang Ping, former deputy director of the National Development and Reform Commission.
Unhappy exporters

The rebate cuts have not pleased domestic firms. Chinese mills and exporters, with their narrowing profit margins, argue the reduction of export rebates will hurt key Chinese industrial sectors.

"We disagree with cutting the tax rebates because the country's steel industry is still troubled with oversupply," says Qi Xiangdong, deputy general secretary of China Iron and Steel Association. The Association has more than 60 domestic steel mill members. In May 2005 China cut tax rebates on steel product exports from 13 percent to 11 percent.

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