China looks to rural subsidy to ease trade surplus

By: | at 07:00 PM | International Trade  

A pilot program by the Chinese government for subsidizing farmers to buy electrical appliances will help the country rein in its trade surplus and ease tensions with trading partners, the Finance Ministry said.

The ministry unveiled the 13% value-added tax rebates for farmers’ purchases of television sets, refrigerators and mobile handsets late last month, initially extending it to rural residents in Shandong, Henan and Sichuan provinces.

On Monday, it gave a detailed explanation of its rationale, saying that the move was intended to extend to farmers the same tax rebates that exporters of such goods have long enjoyed, thereby reducing conflicts with major trading partners.

“China’s home appliance products have started to face restrictions in the US and European markets, with trade rows a frequent occurrence,” the ministry said on its Web site.

“Shipping home appliances to the countryside can help to trim the trade surplus and relieve trade tensions,” it said, adding that the program was also part of Beijing’s strategy of relying more on domestic demand to drive growth and less on exports.

A finance official said earlier that the program would reduce the trade surplus by $10 billion per year.

The surplus reached a record $262.2 billion in 2007, jumping 48% from a year earlier, much to the consternation of the United States and European Union.

The government has chosen 197 models from 15 manufacturers for inclusion in the program, including some made by Haier and Hisense Television sets sold under the program can cost a maximum of 1,500 yuan ($207), while the price ceiling for refrigerators is 2,000 yuan and that for mobile handsets 1,000 yuan, the ministry said. ($1=7.2529 yuan) (Reuters)


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