The mainland may expand exporters' tax rebates to help them cope with a slump, deploying a stimulus tool used during the global credit crunch, according to three people with direct knowledge of the plan.
The government may give exporters a full rebate of the 17 per cent value-added tax on products including furniture, shoes and toys, up from the 13 to 15 per cent.
The policy might be rolled out as soon as this month, depending on whether trade remained weak, the sources said.
Premier Wen Jiabao has pledged policy "fine-tuning" to cope with a deepening slowdown in the world's second-largest economy that saw export gains slump to an annual 1 per cent in July from 11 per cent in June.
The deterioration in trade escalated the risk that Wen will miss his full-year economic expansion target for the first time since he took office in 2003.
"Further policy loosening is needed to prevent a further slowdown in production growth," Sun Mingchun and Sun Chi, Hong Kong-based economists at Daiwa Securities, wrote in a note yesterday. "Export growth should remain weak."
Beijing used the tool in 2009 to help the economy when exports plunged during the global financial crisis, at one point raising tax rebates on 553 products.
Shipments abroad of products covered by the tax change were about US$130 billion last year, or 6.8 per cent of exports.
