China Exports May Cool on Tax Change

China's export growth is likely to show signs of slowing with a change in the country's tax policy, the Wall Street Journal reports.

The expected slowdown in export growth could start to appear in July trade data to be released as soon as this week, the report cited economists as saying.

The anticipated slowing of export growth likely came from Chinese exporters front-loading their shipments in recent months to minimize the impact of a Chinese tax change. That change, which took effect on July 1, reduces longstanding rebates on taxes paid by exporters, which in effect raise their costs.

China has levied a value-added tax of 17% on products, including exports, as in many countries. And the government has, in the past, returned a large portion of that to exporters to avoid discouraging sales abroad.

However, the government announced earlier this year to slash those rebates on a wide range of goods, aiming to curb the booming trade surplus. That prompted Chinese exporters to try to ship as many orders as they could while the rebates were still in effect.

China's exports jumped 27% in June from the same month a year earlier - to $103.23 billion. That gave the country a trade surplus of $26.9 billion, up 85% on a year earlier.

Dong Tao, chief regional economist at Credit Suisse in Hong Kong, expects slowing exports to trim July's trade surplus to "below $20 billion." Other indicators also suggest that a slowdown started in July.