April 15, 2008 at 11:31 am #3686
China extends Fuel Tax Break Boost Q2 2008 Imports
Malaysia News, Reuters, April 16, 2008 – The tax on product imports has been on hold since December, after a November pump price hike — the first in 17 months — did not tempt plants and wholesalers back to the market in force. (Additional reporting by Guo Shipeng and Chua Baizhen in Singapore; Editing by Ramthan Hussain and Jonathan Leff) – BEIJING, April 15 – China moved to shore up gasoline and diesel supplies ahead of the Olympics by extending its value-added tax rebate on some imported fuels into the second quarter, relieving losses for its top oil firms.
The Finance Ministry said in a statement seen on Tuesday it would refund the 17 percent tax on some of the fuel shipped in by Sinopec and PetroChina , a move aimed at increasing domestic supplies without resorting to raising low state-set fuel prices.
By making imports less costly at a time of record prices, the move could strain global markets amid robust demand for distillates such as diesel, and ahead of the driving season in the United States when gasoline consumption usually soars.
“Our understanding is they want the companies to provide the fuel to the market, they can’t just stockpile it,” said Wu Jun, analyst at futures firm CIFCO in Shanghai.
“Perhaps they are thinking of the Olympics but there are also supply problems at the moment,” he added.
Record crude oil prices have put Beijing in a bind.
April 15, 2008 at 11:42 am #6929
If you aren’t familar with what “Chinese Fuel Tax Break” they are talking about here – it is the Chinese Government bailout of its Oil industry (mainly 2 majors: Sinopec & CNPC, most independents are in “red” so it is also a convenient edge for the government companies) at end of every year since 2004 for several $Billion to cover buying import /domestic crudes at $60-100/Bbl but selling diesel/gas at Government fixed price ~$0.87/gal to China’s domestic agriculture / trucking / logistic industries. These bailouts – as in 2007 – are always labeled as “one-off” single occurrence, but are really ongoing to everyone competing against their goods! Only politicians are stupid enough to buy this.
The ongoing Chinese Government Subsidy for Refineries is getting a jump start earlier in year (under cover of “Preparation for Olympics”) a Fifth year on its “One Time Bailout” program. This is a huge advantage and unfair trade practice for all Chinese based industry by enabling logistical cost to remain at less 25% (~$0.90/gal China vs $4/gal global fuel cost) world cost on fuels despite crude/gasoline prices being at record highs and it needs to be challenged or offset with a tariff.
A more obvious Chinese transportation subsidy on steel and coal coke onto vessels resulted in bankruptcy of 21 US steel companies before the US government managed to enact a trade tariff – appears they are still just as blind.
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