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China shares fall on removal of export tax rebates
Published on: 2010-06-24
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Chinese shares fell Wednesday on worries that the removal of tax rebates might hurt exporters.

The benchmark Shanghai Composite Index shed 18.83 points, or 0.7 percent, to close at 2,569.87. The Shenzhen Composite Index for China's smaller second exchange slipped 0.2 percent to 1,045.16.

China announcement Wednesday that it will scrap export tax rebates for hundreds of products in July for the first time since it imposed them in late 2008. That follows the weekend statement that Beijing will allow more flexibility of its currency exchange rate. Analysts said the surprising move would erode corporate earnings.

"It is a double crush for Chinese exporters," said Zhang Fan, an analyst for Debon Securities in Shanghai.

Steel and petrochemical shares, industries that used to enjoy big rebate rates, were dampened by the news.

Baoshan Iron & Steel Co., the country's biggest steel producer, fell 2.7 percent to 6.08 yuan, while Beijing Shougang Co. slipped 1.4 percent to 3.54 yuan.

Fertilizer manufacturer Shandong Liaherd Chemical Industry Co. dropped 2.1 percent to 9.49 yuan, while Shaanxi Xinghua Chemistry Co., declined by 1.8 percent to 8.81 yuan.

Airlines retreated after a brief-lived rally on hopes for a rising yuan that would reduce their debts that are denominated in foreign currencies. China Southern Airlines Co. lost 3.1 percent to 6.69 yuan, while Air China Co. gave up 2.3 percent to 11.3 yuan.

In currency markets, the yuan weakened to 6.8105 to the U.S. dollar, down from Tuesday's close of 6.8102.

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