The Ministry of Finance and the State Administration of Taxation announced that 17 percent value-added tax would be levied on homemade steel products sold by steel makers to domestic processing manufacturers for export.

This move is believed to dampen the appetite of export processing enterprises for steel, thus cooling down the overheating steel sector.

Qi Xiangdong, Deputy Secretary-general of China Iron & Steel Association said in 2004 the market for processing export steel reached more than 16 million tons with 5.7 million tons of homemade steel.

He explained the resumption of the 17 percent tax was one of the actions taken by the government to cool down the sector. Export processing enterprises will have to constrain their demand for steel which will be priced higher due to the additional tax costs.

Yong Zhiqiang with the Haitong Securities argued the 17 percent tax would also help boost steel imports when countries began to restrict exports and encourage imports amid the tightened global steel supply.

By People's Daily Online