Abstract Using a general-equilibrium model, this paper finds that, for an economy suffering from sector-specific unemployment, export tax rebates on imported foreign intermediates can expand its related down- and up-stream industries, thereby boosting exports. This result is verified by using China's data; the export tax rebate, foreign income, and exchange rate volatility contribute significantly to China's exports in the long run, but only the export tax rebate promotes exports in the short run. J. Comp. Econ. , June 2001, 29 (2), pp. 314–326. Chinese University of Hong Kong, Shatin, Hong Kong; City University of Hong Kong, Kowloon, Hong Kong. Copyright 2001 Academic Press. Journal of Economic Literature Classification Numbers: F13, F14, P52.