The central government, which decided in October to cut the tax rebate rate and promised to cover the owed rebates to exporters, has formulated a payment timetable, according to a senior tax official.

The official, on the condition of anonymity, said that all the tax rebates owed before the end of 2002 will be paid off by Thursday, January 15, 2004.

"For those from last year, exporters based in the central and western China will be paid before April 15 and companies in the eastern China will get the money by the end of May," the official said.

Tax rebates are common in international trade. Governments usually return value-added and consumption taxes to export-oriented companies for their products sold abroad.

The government announced in October that it will cut the tax rebate rate by an average of 3 percentage points beginning from January 1 this year. At the same time, it also promised to pay off all the owed rebates before the change because government finance were not well prepared for unexpected soaring exports in the past years.

The rebates owed by the end of 2002 totalled 247.7 billion yuan (US$29.9 billion). The figure in 2003 was more than 50 billion yuan (US$6.04 billion).

Analysts have speculated whether and how the central government would fulfill its commitments to pay off such a huge amount.

But the official said it is achievable as the government will streamline its fiscal spending.

"The government is also studying another way, which will be decided soon," he said.

This corroborates a market guess that the government is considering sourcing the funds by issuing special treasury bonds.

Long Guoqiang, an expert from the Development and Research Centre under the State Council, who is in favour of such bonds, said the bond issuing will give the government more time rather than paying immediately.

He appreciated the government's move to give such a concrete timetable and pay off in such a short time.

"The efficient rebate-payment process will be a trade-off to exporters," he said.

The refund will strengthen the cash flow of exporting companies, who are believed to experience a negative but limited impact from the rate cut.

Liu Mingxin from an export company based in Central China's Henan Province said the company has got the refund owed before the end of 2002 totalling 200,000 yuan (US$24,163).

"But we are still worrying whether we can get timely refund from the local government," he said.

The rebate reform announced in October said the central government will be responsible for rebates happened before the end of 2003. But for the refunds happened after the change, the central and local governments will split the burden of by a proportion of 75 per cent to 25 per cent.

The official believed that will not happen.

According to the refunding procedure, if the local government does not pay the 25 per cent, the companies will not be paid by the central government, he explained.

"I do not think the local governments will afford to pull these companies, a major driver to local economy, into a mired situation because of their fault,'' he said.

The administration will keep an eye on the behaviour of regional government and receive complaints from companies, he said.

"We require the local government to submit regarding report fortnightly, in a bid to check whether anything needs improving or changing," he said.

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