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China favors jobs at home over freer trade

Beijing restores tax breaks and other perks for Chinese exporters. It's worried that declining exports mean more social unrest.

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BETTER DAYS: In early December, workers gathered at a newly opened section of a port in Shanghai, China. But exports are now falling – down 2.2 percent in November.

AP

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In recent years, China scrapped many of its export-friendly policies – a turn welcomed by foreign competitors as a step toward freer, fairer trade.

In typical style, Beijing did so incrementally, "crossing the river by feeling the stones," as Deng Xiaoping is quoted as saying.

But now, with the economic downturn in full effect, China is scrambling back toward the riverbank. The government has reversed itself on tax rebates and other export-friendly policies, restoring perks it had only recently scrapped.

The latest tax rebate hikes, which take effect Jan. 1, will be doled out to exporters of motorcycles, sewing machines, industrial robots, and other goods, according to the China Daily.

Beijing's about-face risks raising tensions with the US and other trade partners. Washington and others have long complained about China's "unfair" trade policies and a flood of cheap Chinese imports. The US welcomed the 2007 elimination of some tax rebates as a sign of progress, only to see many of them now restored.

But analysts here say China isn't trying to undercut foreign competitors. Rather, it's giving life support to flailing exporters – and trying to stave off the social unrest it fears will result from massive factory layoffs.

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