BEIJING (Reuters) - China, the world's top steelmaking country, pays billions of yuan a year to exporters who sell higher quality steel products overseas, part of a policy launched almost a quarter of a century ago to encourage local mills to make value-added goods.
CRITICISM FROM BRUSSELS TO WASHINGTON
Government programmes like these have drawn ire from U.S. President Donald Trump, who has accused Beijing of artificially supporting its domestic industry, flooding the global market with cheap, subsidised steel and hurting American companies. http://reut.rs/27xDfpS http://reut.rs/1IVExN1
Subsidies have been one of the targets of his trading dispute with China, alongside China's intellectual property practices and its trade surplus with the United States.
Some Chinese exporters have for years taken advantage of the generous rebate system by mislabelling ordinary steel products as high-quality ones or by adding a small amount of minerals to claim them as steel alloys.
China has tightened the tax rebate system in recent years, leading to sharp drops in steel exports, especially for alloyed steel, down to 75.4 million tonnes in 2017 from a record 112.4 million tonnes in 2015. The heat over China's rebate system has also eased as domestic demand strengthened, limiting volumes for sale abroad.
Still, Tan Ah Yong, secretary general of the Southeast Asia Iron and Steel Institute, said the rebates have been a longstanding issue with China.
"We have been raising this issue for many years of (China's) steel exporters taking advantage of loopholes in the tax and rebate structure to bring out steel products at low prices," Tan said.
BORON AND CHROMIUM
China removed boron-added steel from the products eligible for rebates in 2015, but kept tax refunds intact for most other elements and products.
Most Chinese exporters have switched to chromium since then, said Tan. That's another element that can make steel valid for rebates, without raising the cost sharply for steel producers.
Both boron and chromium are used to harden steel, and adding just 0.3 percent of chromium can get a 5-13 percent tax rebate in China.
Of the 75.4 million tonnes that China exported last year, 33.17 million tonnes were declared as alloy steel, data from China Iron and Steel Association (CISA) showed. In 2016, 63.89 million tonnes were declared as alloy steel out of a total 108.46 million tonnes shipped.
Using the maximum rebate of 13 percent, the refunds due Chinese exporters for 2017 would be $2.8 billion, according to Reuters calculations based on an average global steel price of $657 a tonne. In 2016, the rebates reached $4.6 billion.
(Reporting by Muyu Xu in BEIJING and Manolo Serapio Jr. in Manila; Editing by Tom Hogue)