The export rebate program is a victim of China's soaring trade success.

The export rebate is dear to our hearts and everyone says this must now be abolished.

But produce may be routed through an EC country other than where it was produced, and the export rebate claimed in the second country.

Galanz's difficulties may be repeated across several other industries where export rebates have underwritten China's exports in fiercely contested international markets.

The export rebate merely allows exporters to enter world markets free of VAT, not at a subsidized price below the pretax price.

As a result of the falsified sales figures, Mr. Piana collected as much as $20 million in bonuses known as export rebates from the Argentine Government.

Paperwork from the fake transactions was then used by Mr. Piana, the president of Casa Piana, an exporting company, to request the export rebates from the Argentine Government.

"The export rebate cuts in effect amount to a revaluation of the yuan," China's currency, said Zhang Shuguang, director of the Unirule Institute, a private economics research center in Beijing.

For example, Li was caught up in an "export rebate fraud" scandal uncovered in the Guangdong coastal city of Shantou in 2000, and criticized by Zhu Rongji for failing to detect the scam.

Economists generally agree that introduction of a VAT would not of itself improve the competitive position of the United States in world markets because the export rebate and import tax allowed for the VAT are simply border tax adjustments required to make goods price competitive internationally.