Starting from July 1, China will cut or eliminate export tax
rebates for more than 2,800 export items. This is the boldest move
yet to rein in exports since China joined the World Trade
Organization in 2001.
According to the Ministry of Finance, the targeted items account
for 37 percent of all exported products. The textiles industry is
one of the most affected areas.
The tax rebates of textile export goods will be deducted by 2
percent.
Currently the average profit margin in the textiles and clothing
industry is no more than 5 percent. Such a disincentive will result
in benefits of the textile industry shrinking by 10 to 20
percent.
Many clothes business traders say they've sensed the pressure
brought along with the measure.
Huang Xinhua is deputy manager of a textile company in eastern
China's Zhejiang Province.
"As we could not get the cargo delivered by the end of June, we
will have to accept the reduced tax rebates. So basically for this
round of deals our net profit is very small."
The textiles industry is described by the Ministry of Commerce
as "easy to trigger trade frictions".
As the major creator of China's huge trade surplus, it comprised
more than 70 per cent of China's total trade surplus last year.
Professor Xu Fu with the International Economy department of the
Tianjin-based Nankai University, says China's exporters should use
this opportunity to restructure the industry, and actively change
their ways of making profits.
"Small textile clothes manufacturers should improve the quality
of their products and their service, in order to offset the loss in
tax rebates. They should also develop a series of brand name
products to increase their competitiveness."
(CRI July 1, 2007)
