China should reduce its dependency on exports by ending the tax breaks given to foreign companies that set up manufacturing bases in the country, the WTO has said. In its first formal review of China's trade policies, the organization advocated boosting domestic market services to remove economic imbalances and provide more jobs for displaced farmers. It also said the move would help narrow China's trade surplus, thereby reducing tensions with the US and Europe. The report said that offering favorable treatment to exporters in certain industries runs "the risk of subsidizing good investments, which might have been undertaken in any event, or turning bad investments into profitable ones".