The Hidden Policies That Power China’s Export Boom Huge tax breaks and a weak currency sustain exports, widen the government budget deficit and complicate the country’s efforts to rebalance its economy.

China has kept its export engine roaring with a combination of tax rebates and a weak currency, helping sustain economic growth at home while sending a surge of Chinese goods into markets abroad.

But that strategy is fueling tension with its trading partners. And this week, officials from Brussels arriving in Beijing are preparing to press Chinese officials about a European trade deficit with China that exceeds $1.1 billion a day.

Europe’s leaders say China tilts the scale with government subsidies and low-interest loans to its manufacturers, flooding European markets with inexpensive goods.

But subsidies are only part of the advantage Chinese exporters enjoy. The renminbi, China’s currency, remains unusually weak, making China’s goods cheaper overseas. At the same time, Beijing refunds exporters hundreds of billions of dollars a year in taxes, further lowering their costs. Both policies have become difficult for China to unwind.

The renminbi is down more than 14 percent in inflation-adjusted terms from its early-2022 level against a broad set of currencies. Over roughly the same period, China’s trade surplus has nearly doubled. While the weak currency helps exporters, it also makes foreign goods more costly for Chinese consumers and businesses.

China’s export tax rebates have also surged. Rebates to export companies for value-added taxes reached $318.2 billion last year, equivalent to 1.5 percent of China’s economy, according to data from the country’s Ministry of Finance.