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China Hikes Threshold for Oil Tax, Helping Firms

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Source: AFP

China has raised the threshold for a tax on crude oil charged to the nation’s two biggest producers, the firms said, helping to ease their financial burden and encourage output.

The Ministry of Finance hiked the minimum level for the levy to US$55 a barrel, up from US$40, PetroChina and the China Petroleum & Chemical Corp (Sinopec) said in statements late Thursday.

The move was retroactive to November 2011, they said.

Analysts said the move would help the corporate earnings of the companies and encourage oil production.

“It’s time for the government to boost companies’ enthusiasm for production,” Wu Dazhong, an analyst at Shenyin Wanguo Securities, told AFP.

“This will definitely lift their stock prices, since investors believe the new policy will bring better corporate earnings,” he said.

Investors cheered the news on Friday.

PetroChina was up 1.0 per cent at RMB7.40 in Shanghai by midday. Sinopec initially gained nearly 2.0 per cent, but was down 0.3 per cent to RMB7.40 by midday.

In Hong Kong trading, PetroChina gained 2.5 per cent to HK$10.64 by midday, while Sinopec was up 1.9 per cent at HK$8.81.

The new tax ranges from 20 to 40 per cent of the price of a barrel of oil that costs more than US$55.