China Increases Export Tax Rebates on Stainless Steel and Steel Pipes

China has announced its decision to increase tax rebates for 397 products including steel to electronics in its move to boost export shipments amid its trade war with U.S.

While the rebate rates on the products included in the list have been increased to 16%, in case of stainless steel products and steel pipes the rebate rates have been increased to 9% and 13% respectively. It is not clear what the current export rebate rates on these products were.

China, the world’s top steelmaking country, pays billions of yuan a year to exporters who sell higher quality steel products overseas, part of a policy launched almost a quarter of a century ago to encourage local mills to make value-added goods.

This act of the Chinese government has drawn criticism from U.S. President Donald Trump, who has accused Beijing of artificially supporting its domestic industry, flooding the global market with cheap, subsidised steel and hurting U.S. companies.

Although in recent years China has tightened the tax rebate system leading to sharp drop in steel exports, especially for alloyed steel (down to 75.4 MnT in 2017 from a record 112.4 MnT in 2015), some of the Chinese steel exporters take advantage of loopholes in the tax and rebate structure to bring out steel products at low prices.

This is because in 2015 China had removed boron-added steel from the products eligible for rebates, however, it has kept tax refunds intact for most other elements and products. Subsequently, most Chinese exporters have switched to chromium that makes steel valid for rebates, without raising the cost sharply for steel producers.

Chinese exporters have continued to take advantage of the rebate system by mislabelling ordinary steel products as high-quality ones or by adding a small amount of minerals to claim them as steel alloys. Both boron and chromium are used to harden steel, and adding just 0.3% of chromium can get a 5-13% tax rebate in China.

Now amid high tariffs on steel imports by U.S. which used to be one of the key Chinese steel pipes importers coupled with an increase in China’s export rebate rate for stainless steel and steel pipes, the Chinese manufacturers will flood the other overseas market. In 2015, the country exported about 8.9 MnT of steel pipes and tubes and 3.3 MnT of stainless steel. In 2016, the same stood at 8.7 MnT and 3.8 MnT respectively whereas in last year i.e. in 2017, China exported about 7.8 MnT of pipes and tubes and stainless steel export stood at 3.8 MnT.