China has removed import tariffs from components of two types of textile machines to encourage domestic textile firms to develop machinery of their own.

Tariffs and value-added tax paid by importers of the components will be paid back to the firms and reinvested in research, according to the Ministry of Finance (MOF).

As a result of the innovation strategy, imports of these two textile machines as whole products, namely high-speed air-jet looms and automatic winders, will no longer be tax free and tariffs will be imposed after December 31.

The two machines are key to the restructuring of the textile sector, business insiders said.

The tax incentives for component imports are aimed at encouraging manufacturers to use the tax returns to boost their innovation capacity and develop advanced machines of their own.

"The long existing tax-free policies for imported textile machinery have undermined the competitiveness of domestically-produced machines," said an MOF official.

China's textile industry has been told to improve its structure by upgrading technologies and developing more self-owned spinning and weaving machines in the eleventh five-year plan which runs until 2010.

The textile sector is the first to secure the tax rebates that were earlier promised by the Chinese government as part of its efforts to rejuvenate equipment manufacturing in China.

It has pledged to grant tax rebates for component imports of technological equipment under 16 categories including environmentally-friendly power systems, petrochemical equipment and oceanic engineering equipment.

(Xinhua News Agency July 6, 2007)