22 October 2008

Export-tax rebate rise set to boost industries

CHINA will raise export-tax rebates on textiles and garments from November 1 - the second increase in three months - to help struggling China industries plagued by weaker global demand.

Tax rebates on shipments of textiles and garments will be increased to 14 percent, the Ministry of Finance said in a Website statement yesterday.

China last lifted the rebates by 2 percentage points to 13 percent on August 1.

The ministry also said that the rebate on the exports of toys would be increased to 14 percent from 11 percent and the amount on furniture shipments would rise to 13 percent from 11 percent.

Rebates on exports of selected ceramic, plastics, mechanical, electrical and medicinal products will also be lifted by 1 to 2 percentage points, according to the finance ministry.

The State Council, China's Cabinet, said over the weekend that it would push forward policies to spur growth through measures including raising tax rebates for exporters and cutting some of the administrative fees involved in property transactions.

The moves were aimed at maintaining steady economic expansion and shielding the country from turmoil in the international markets, the government said.

China's economic growth was 9 percent in the third quarter, the slowest in five years.

China's exports of garments reached US$87.1 billion in the first nine months of this year, up 1.8 percent year on year, according to Customs data. The growth increase was 21.2 percentage points lower than a year before.

A rising yuan and increasing production costs have driven a lot of smaller Chinese toy producers out of business. A total of 3,631 toy exporters, or 52.7 percent of the industry's total, were closed in the first seven months, according to Customs.

Commerce Minister Chen Deming said in September that the government would help labor-intensive exporters to overcome difficulties they were facing as global demand faltered.

Chen also encouraged them to be innovative by upgrading their products to meet challenges.

Despite the higher rebates, industry analysts said that Chinese textile and garment manufacturers would still face difficulties in coping with rising input and labor costs.

The initiatives may herald more stimulus policies by the government, such as measures to spur domestic demand and to offer credit support to firms facing a capital crunch, analysts said.

"The tax-rebate rises won't make a big impact on textile companies, but it reflected the government's determination to help the export sector," said Zhang Bing, a Sinolink Securities Co analyst.

"Giving some credit support and direct subsidies to those companies as the next step will likely achieve better results."