China has resumed a previous policy of giving tax rebates for the export of certain oil products. 

But it has reduced the export quota for another group of oil products to ensure sufficient supplies for the domestic market, industry officials Thursday said.

From the start of this year, the country has restored gasoline and naphtha export tax rebates that were suspended from September 1 to December 31 last year.

Although reinstating the rebates this year will encourage domestic oil suppliers like PetroChina and Sinopec to sell more oil abroad, the nation has kept a quota system for refined oil exports.

The Ministry of Commerce said on its website that the country has reduced the export quota for refined oil, including gasoline and diesel, to 9 million tons from last year's 12 million tons.

For crude oil, the export figure remains the same, one million ton.

"As there has been no official announcement concerning the extension of the tax rebate suspension, it means the government will reinstate the preferential tax policy," an official from the National Development and Reform Commission (NDRC) said yesterday.

But he added related government bodies, including the State Administration of Taxation, are now studying the issue of refined oil exports for 2006, and a change in the export tax for those products could not be ruled out.

An official in charge of export and import issues at the State taxation regulator yesterday said the tax rebates for gasoline and naphtha will continue at the same rate as before the suspension.

The government temporarily cancelled the tax breaks in order to limit oil product exports and ensure domestic supply for the last four months of last year, a move that followed gasoline rationing in South China's Guangdong Province due to oil shortages.

Before the policy change, gasoline exporters in China enjoyed an 11 percentage point rebate of the 17 per cent value-added tax charged on gasoline.

For naphtha, the rebate was 13 percentage points of the 17 per cent tax.

China sold 10.47 million tons of refined oil to foreign countries in the first eight months of last year, a year-on-year increase of 42.3 per cent.

Responding to the September rebate suspension, gasoline exports in that month from Guangdong dropped by as much as 52.4 per cent from August.

Dong Xiucheng, a professor at China Petroleum College, said that restoring the tax rebates would not trigger a big rise in refined oil exports from China this year.

"Anyway, the total amount of oil sold abroad cannot exceed the quota," he said.

Liu Gu, a senior oil analyst with Guotai Jun'an Securities (Hong Kong) Ltd, said domestic refined oil supply would meet demand this year, and severe shortfalls were "not likely."

China in the first 10 months of last year produced 44.59 million tons of gasoline, with demand at 39.4 million tons for this period.

Both PetroChina and Sinopec yesterday said they would first and foremost try to meet domestic demand, but higher oil prices on foreign markets would encourage them to export more.

"We are doing business, and we aim to increase profitability for our shareholders," a Sinopec official, who declined to be identified, yesterday said.

Sinopec sources earlier said the government-controlled refined oil price was as much as 1,700 yuan (US$210) a ton lower than the world level last year.

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