Navigating China’s Latest Export Tax Rebate Adjustments: What Are the Implications?

Starting December 1, 2024, China implemented significant changes to its export tax rebate system. The rebate rate for products such as refined oil, photovoltaic products, and batteries was reduced from 13 percent to 9 percent, while rebates for aluminum, copper, and certain oils and fats were eliminated. This policy shift aims to encourage domestic consumption and reduce export dependency, aligning with China’s broader economic goals. Businesses, particularly those in the metals and biofuels sectors, will face higher export costs, potentially reducing competitiveness and impacting global supply chains.

On November 15, 2024, the China Ministry of Finance (MOF) and the State Taxation Administration (STA) released the Announcement on the Adjustment of Export Tax Rebate Policies (Caishui [2024] No. 15). Effective from December 1, 2024, the 13 percent export tax rebate for refined oil, photovoltaic products, batteries, and certain non-metallic mineral products would be reduced to 9 percent. In addition, export tax rebates for aluminum and copper products, as well as chemically modified oils and fats, would be terminated.

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This policy shift aims to transition the related industries from an export-focused model to a more domestic-oriented industry. Previously, these products benefited from relatively high rebate rates on export taxes, which helped keep Chinese goods competitive on the international stage. This policy aligns with China’s broader efforts to recalibrate its trade surplus and redirect resources toward domestic consumption amid global economic pressures.

The new measures are expected to have a pronounced impact on Chinese businesses, particularly those in the metals and biofuels sectors. Aluminum and copper exporters may face increased costs in the short term, reducing their competitiveness in global markets and potentially leading to lower export volumes. Overseas countries such as the European Union (EU) and the United States (US), which rely to some extent on China’s exports as part of their supply chains, may also see market prices increase for certain products such as biofuels, automotive components, and electronic parts made from specific metals. Domestically, this may prompt a shift toward meeting internal demand, which could alleviate inventory pressures but limit foreign revenue streams.

In this article, we will take a close look at the latest export tax rebate adjustment and analyze the short-term and long-term impacts for business owners.

What are the changes to export tax rebates?

Export tax rebates terminated

This adjustment cancels export tax rebates for aluminum products, copper products, and chemically modified oils and fats derived from animals, plants, or microorganisms, covering a total of 59 tariff items:

• Chemically modified oils and fats: These include non-edible oils and fats derived from animals, plants, or microorganisms.
• Copper products: A wide range of copper items such as bars, rods, profiles, wires, plates, sheets, strips, and foils.
• Aluminum products: Various aluminum items including hollow profiles, solid profiles, plates, sheets, strips, and foils.
• Other metals and materials: This includes specific alloys and composite materials.

A full list of products for which export tax rebates have been canceled can be found here.

Export tax rebates reduced

This adjustment reduces the export tax rebate rate from 13% to 9% for certain refined oil products, photovoltaic products, batteries, and some non-metallic mineral products, covering a total of 209 tariff items:

• Refined oil products: This includes various types of gasoline, diesel, and aviation kerosene.
• Photovoltaic products: Items such as solar cells and modules.
• Batteries: Different types of batteries used in various applications.
• Non-metallic mineral products: This category covers a variety of items, including certain types of graphite, silicon carbide, and other processed minerals.

A full list of products for which the export tax rebate rates have been reduced can be found here.

Overview of China’s export tax rebates system

Export tax rebate is a fiscal policy tool used by China to support exporters by eliminating double taxation on goods sold overseas. Essentially, this system refunds the value-added tax (VAT) and consumption tax (CT) that exporters paid during production and distribution, making Chinese goods more competitive in foreign markets. Introduced in 1985, China’s export tax rebate system has been a cornerstone of its trade policy, evolving significantly to adapt to changing economic and trade environments.

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In the early years, the system focused on encouraging export-led growth but faced inefficiencies and inconsistencies in implementation. Major reforms began after China joined the WTO in 2001, including the expansion of rebate eligibility and adjustments to rebate rates. For example, a 2012 policy allowed refunds for both self-produced and certain non-self-produced goods, broadening the scope. Subsequent reforms simplified rate structures, reducing the number of rate tiers and aligning rebate rates closely with VAT rates. During the COVID-19 pandemic, further adjustments in 2020 raised rebate rates for over 1,400 products to support struggling exporters.

China has also optimized the administrative processes for claiming rebates. In the past few years, it introduced measures to streamline declarations, removing penalties for late filings while maintaining VAT exemptions. Pre-declaration requirements and redundant documentation were eliminated, making the system more efficient and accessible for businesses. These developments ensure that China’s export tax rebate regime remains a vital tool for sustaining its role as a global export leader.

Expansion of departure port tax rebate policy

In addition to the export tax rebate rate adjustment, on November 12, 2024, the MOF, the General Administration of Customs, and the STA jointly issued the Notice on Expanding the Scope of the Port of Departure Tax Rebate Policy (Caishui [2024] No. 31). Effective from December 1, 2024, the policy introduces several updates aimed at improving export logistics and supporting compliant export enterprises.

Under the revised policy, eligible export goods transported via rail from designated departure ports (referred to as “ports of departure”) to specified exit ports are eligible for the departure port tax rebate policy. To qualify, exporters must belong to Grade A or Grade B taxpayers in the export tax refund (exemption) management system, and be registered with customs (excluding discredited entities). Rail transport is managed exclusively by China Railway Group and its subsidiaries, using containerized cargo transported via freight trains.

The declaration and tax rebate processes have been refined for efficiency. Exporters must apply for a tax rebate at their tax authority using electronic customs declarations, which are transmitted daily between customs and tax authorities. Goods exceeding a two-month timeframe from departure without customs clearance will be treated as not exported unless exceptions like force majeure apply.

Additionally, the policy extends the list of eligible ports of departure and exit ports. For instance, the Wuxi (Jiangyin) Port has been added as a departure port, and several ports in Guangdong and other provinces have been included as eligible transit or exit points. Updates also modify previously designated ports in the Guangdong-Hong Kong-Macau Greater Bay Area.

Potential impacts of the export tax rebate adjustments

The adjustment of export tax rebate rates is set to influence China’s trade practices, with implications for both domestic industries and global markets. By reducing or eliminating rebates on products such as aluminum, copper, and biofuel feedstocks, the policy aligns with China’s broader strategies to encourage domestic development, reduce overcapacity, and increase government income. The changes will impact export-oriented businesses, trading dynamics, and industrial strategies, leading to both short-term challenges and long-term opportunities.

Short-term

In the near term, the reduced export tax rebate rates will significantly increase export costs for products like aluminum and copper, making them less competitive in international markets. Aluminum exports, which totaled over 5 million metric tons in 2023, are expected to drop as smaller processors reliant on rebates struggle to maintain profitability. For the international aluminum market, this may cause price spikes and supply tightness, as evidenced by the contrasting market responses in Shanghai (price drops) and London (price surges). Additionally, the US and EU, already imposing tariffs and trade barriers on Chinese aluminum products, may experience heightened tensions with China over trade adjustments.

For clean oil products, such as gasoline and jet fuel, the policy will cut export margins by around US$3 per barrel, creating immediate financial strain on Chinese refiners. Exporters are expected to explore alternative routes, such as increasing trade route quotas, which remain tax-free under the new policy. However, the additional administrative complexity and limited flexibility of these routes may restrict their utility for many exporters.

The termination of China’s export tax rebate for used cooking oil (UCO) is likely to impact biofuel production in the US and EU, which rely on Chinese UCO as a key feedstock for bio-based diesel (BBD) and sustainable aviation fuel (SAF). The immediate effect has been a price increase in UCO, with FOB China UCO offers rising by US$150/MT. This change is expected to raise production costs for biofuel manufacturers in both regions, leading to potential challenges in securing affordable feedstock. UCO-dependent producers may be prompted to seek alternative sources, increase efforts to boost domestic UCO collection and processing and make adjustments in their supply chain.

Long-term

Over the long term, the adjustments to export tax rebates are likely to drive changes in the strategic direction of affected industries. By reducing incentives for low-value-added exports, businesses may be prompted to focus more on higher-value production and innovation. For example, sectors such as photovoltaics, batteries, and clean fuels may explore ways to adapt their global supply chains. This could involve establishing processing facilities abroad or forming partnerships in key markets, especially in response to rising export costs and international trade barriers. Companies may find it necessary to reassess their market strategies to maintain competitiveness, particularly in light of increasing tariffs imposed by the EU and the US.

Domestically, businesses could see stabilizing effects on local markets as a result of these policy shifts. Reduced export rebates could encourage companies to focus on more sustainable domestic supply chains, particularly for critical materials like aluminum and copper. Companies that rely on these materials exported from China may need to adjust their sourcing strategies to account for changes in rebate rates and supply chain dynamics.

Finally, the adjustment underscores China’s broader strategic intent to balance international trade relations and domestic priorities. Reducing export tax rebate rates not only mitigates risks associated with overcapacity and resource dependency but also acts as a preemptive concession amid escalating trade tensions. For global markets, the shift will likely deepen the fragmentation of supply chains, fostering distinct regional markets and challenging the globalization model that has long-defined commodity trade.

Suggested strategies

To mitigate the challenges posed by tax rebate changes, companies should analyze the impact on their products, review and adjust pricing strategies, and reassess product classifications for compliance. Exploring new business models and supply chain optimizations can help reduce cost pressures. Moreover, companies should maintain communication with government agencies and industry associations to stay informed about future policy changes. Additionally, diversifying markets and production locations and investing in research and development to innovate and upgrade production capabilities will help companies enhance resilience and maintain profitability despite policy changes.

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