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China Scraps Export Tax Rebate


China is ending tax rebates on some exports - a move business experts say is aimed at tackling overcapacity and easing trade tensions before the G20 summit.

China's Ministry of Finance says more than 400 goods, including some steel products, non-ferrous metals, corn starch and chemicals will no longer receive export tax rebates, starting next month.

This is the first time China has removed tax breaks for exports since the outbreak of the global financial crisis in September 2008.

Many business experts say the move, which comes a few days after China ended its currency's peg to the dollar, is part of an effort to reduced overcapacity as exports continue to stabilize.

The secretary-general of the European Chamber of Commerce in Beijing, Dirk Moen, says scrapping the tax rebate is no coincidence and it could help ease trade tensions before a G20 summit later this week in Canada.

"Over all this is good news. When I see on top of the list there is quite a lot of steel products there... this has been a hot topic not only in Europe but other regions, so I can only welcome that," said Moen.

Europe and the United States have long protested to Beijing about Chinese companies receiving export subsidies and what Moen describes as artificial help from the government.

Many economists and business leaders are also concerned that factory overcapacity has been rising in China, due in part to the country's economic stimulus package and state-sanctioned bank lending, which nearly doubled loans last year. While the lending and government efforts to support business protected China from the worst of the global financial crisis, there now are fears that too many factories are being built, diverting funds from other, more productive areas.

Chinese President Hu Jintao will attend the G20 summit, which begins Saturday, joining other world leaders to discuss how foster a recovery from the financial crisis.

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