China will impose a tax on crude oil exports by foreign partners in offshore joint ventures the Ministry of Finance announced yesterday.
As reported in China Daily, the tax – a 5 percent tariff on oil exports – will take effect August 1, but existing contracts will be granted a five-year holiday.
“The move is aimed at saving domestic resources and bringing the policy for foreign companies in line with that for domestic operators,” Gong Jinshuang, a senior analyst at the economic and technology research institute affiliated to the China National Petroleum Corp, told China Daily.
It is not known just how much oil produced by JV agreements is exported every year, but the proportion is probably insignificant when compared to China’s overall production.
China’s crude exports, including those by foreign joint ventures, in the first half of this year were 1.82 million tons, down 39 percent over a year earlier, according to Customs data.
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Well at least that is better than suddently forcing them to do it when their reserves run low. Tootal had their export license withdrawn in Dalian last year when they refused to cut back on exports to ‘patriotically assist’ with domestic sales – at far lower prices than the export market was paying for refined. I don’t buy the ‘bringing into line with domestic companies’ line though.
The fact is, China is purchasing energy resources domestically at discounted levels and is forcing the foreign invested companies to divert profits away from exports and into China’s lower value domestic market. This was not actually the original intention of the foreign investors. State interference in foreign invested enterprises ability to sell to the true market price ? You betcha. Of course the Chinese government don’t have to answer to the shareholders – on either side.
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