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          Taxes alone won't cut trade surplus

          (Reuters)
          Updated: 2007-05-28 08:39


          View of a steel-making factory on the outskirts of Shanghai February 1, 2007. [Reuters]

          New export taxes on polluting and energy intensive industries will help reshape how China's economy grows, but alone are not enough to resolve its trade imbalances with the United States, a top Commerce official said on Sunday.

          Beijing said last week it would impose or increase taxes on a range of metal exports in an effort to control shipments of high-energy products and ease its huge trade surplus.

          "You cannot expect to resolve the trade balance by simply curbing export patterns," Vice Commerce Minister Gao Hucheng said on the sidelines of a conference when asked about the changes.

          "These products make up a relatively small portion of exports. But the point is that this reflects changes in trade and economic growth, which will have advantages in the short term and even greater significance in the long term."

          The announcement of the tax changes came ahead of a "strategic economic dialogue" in Washington between high-level U.S. and Chinese officials at which China's huge trade surplus was a major bone of contention.

          But the high-level economic talks failed to ease trade rifts between the two economic giants, risking rising tensions ahead of the race for the U.S. presidency.

          Chinese Vice Premier Wu Yi and a delegation of ministers left the U.S. capital on Friday, after days of talks that made modest advances but were overshadowed by a lack of concrete progress on the key issue of China's currency.

          From June 1, China will impose a tax of between 5 and 10 percent on exports of over 80 types of steel products, a bone of contention with both the United States and Europe.

          Exports would not slow down much this year since most contracts had been signed already, but next year could see a big fall-off, said Li Xinchuang, vice-president of the China Metallurgical Industry and Research Institute.



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