International Law

What Happened to Rebalancing the Economy?

By Stan

China has raised export tax rebates on some goods including machinery, furniture, toys and plastic products - another move to help weather the sagging international trade in the global economic recession.

The Ministry of Finance said [Monday] that the export rebate for machinery such as sewing machines was expanded to 17 percent from 14 percent. The rebate for furniture and toys was raised to 15 percent from 13 percent and 14 percent respectively. The rebate for plastics was increased to 13 percent from 11 percent.

Other items including porcelain, glass and steel, aquatic products, trunks, shoes, caps and some processed agricultural products, also had rebates increased from June 1, the ministry said.

“The government obviously intends to save the country’s export sector,” said Xue Jun, a trade analyst at Changjiang Securities Co. “It may help domestic exporters reduce business costs, but it can’t deal with the root of the problem - the contraction of external demand.” <Shanghai Daily>

Saving jobs is priority number one, this is understood. However, wouldn’t it be better to directly stimulate domestic demand than to prop up the sector that is the fundamental cause of China’s unbalanced economy?

I thought we wanted to move away from an over reliance on exports — this is not the way to do it.

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Full post as published by China Hearsay on June 10, 2009 (boomark / email).