2011-02-17

Yuan reform continues part XVII

China to Launch Yuan Option Trading

It doesn't allow for yuan trading, but it does allow businesses that deal in foreign currency to hedge their risk. It also means the government can allow the yuan to appreciate more quickly, if it wants.

China is also easing back on export rebates.
China Seeks New Normal for Export Tax Rebates
Exports alone were worth US$ 1.57 trillion. And export tax rebates rose to record 732.7 billion yuan – an amount that exceeded the government's nationwide spending on health care or subsidized housing.

Now, as demand for China's exported goods rises again, export tax rebates for at least some products are likely to be reduced by the government. The rollbacks began last year for a few items. And the move would reverse the trend of friendlier rebate policies enacted two years ago to help exporters after the outbreak of the global financial crisis.
Tax rebates were increased for thousands of exported products during the financial crisis.

The groundwork for a new tax policy was laid with recent media reports that said the government has been considering cutting tax rebate rates.
China still provides a lot of aid to exporters, but a falling tax and rising yuan will hurt the sector. This, again, is all with an eye towards supporting the domestic economy.

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