China ends tax-free status

Stepping up its campaign to cut down on fuel wastage, China has unveiled a new policy to make it harder for Chinas many small and energy-inefficient oil refineries to make money. Around 90% of Chinese refining capacity is owned by China Petroleum and Chemical Corp. (Sinopec) and China National Petroleum Corp. (CNPC), while the rest is owned by independent refiners. One report estimates that these refineries account for 1 to 1.5 million barrels a day of Chinas refining capacity. Beijing previously tried to phase out these refineries, which provide employment for local communities, but stopped short of any heavy-handed move in part due to fears of social unrest. In April, the Ministry of Commerce said the tax-free status for the processing of diesel fuel and fuel oil would be eliminated from April 26. The new policy will make it more expensive for traders and refiners to import, process and export diesel fuel and fuel oil, if they have to pay tax for each trade. The new regulation also aims to reduce energy consumption within China, a key priority for China which wants to reduce its reliance on foreign oil. (April 6, 2007)