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By Polly Yam
HONG KONG, April 27 (Reuters) - China should raise tax rebates on exports of all aluminium products to 17 percent to boost outflow, the vice chairman of a powerful industry body that influences government policy told Reuters on Monday.
The China Nonferrous Metals Industry Association's vice chairman also said Beijing would not cancel or cut the current 15 percent tax on exports of primary aluminium. That is classified as a high-energy item for which the government is not easing the policy of restricting exports, Wen Xianjun said.
The association had not discussed a possible tax on imports of primary aluminium, Wen said. Imports would fall in coming month as prices dropped in China, the world's top consumer and producer of the metal, he added.
"We suggested the government give the full value-added tax back on exports of all aluminium products, except high-energy items. Primary aluminium is a high-energy item," Wen said in a telephone interview. He was referring to the 17 percent VAT.
He added China's exports of semi-finished products were not competitive globally because of strong Chinese aluminium prices.
Chinese prices have stayed strong since the State Reserves Bureau (SRB) bought 590,000 tonnes of aluminium since December. The price has risen 9 percent this year, in a contrast to a 7 percent fall in the London Metal Exchange..
Strong Chinese prices had driven up imports of primary aluminium, which surged 1,487 percent on the year and 580 percent on the month to 85,965 tonnes in March.
Wen said the March imports were not too big relative to the Chinese market and Beijing was not studying a tax on the imports.
"Government departments did not come to us discussing the import tax. As far as I know, they did not study this," Wen said, adding talk on such a tax was a rumour.
Trading and smelter sources said in February Beijing might consider reinstating a 5 percent tax on imports of primary aluminium as imports surged, and that consideration had been shelved in the face of growing accusations of protectionism in international markets.
Wen said China's imports of primary aluminium will fall in coming months as prices fell on Chinese smelters' restarting of idle capacity.
SRB BUYING
Production from restarted capacity will be much bigger than any possible additional SRB buying, Wen said. But he added he was unsure whether the SRB would make that additional buying given the state body had achieved its aims of pushing up prices and supporting smelters facing weak demand.
Another vice chairman of the association Jia Mingxing, also president of state-owned research group Antaike, said in mid-April that a SRB's three-year plan was to buy 1 million tonnes of aluminium.
"China can easily restart 2 million tonnes of idle capacity," Wen said. "If smelters do not see clear on the outlook and restart the capacity, prices would fall sharply. That may force those smelters to shut again in the second half."
Global demand for aluminium has stayed weak, while China's consumption growth has lagged behind output growth, which would weigh on aluminium prices, Wen said.
Wen did not provide an estimate for restarted capacity in China. Smelter officials estimated China could restart about 4 million tonnes of idle capacity in the first half. ($1=6.84 yuan)