Chinese Mandarin - Textile profit shrinks on tax rebate slash

BIZCHINA / Impacts

Textile profit shrinks on tax rebate slash

(CRIENGLISH.com)
Updated: 2007-07-01 10:02

Starting from July 1st, 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 targetted 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 per cent.

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.

Special coverage:
Tariff Rebate Slash

Related readings:
China mulls serial policies to improve growth structure
Tax rebates adjustment affects listed firms
Tax rebate cut as rebalancing act Tax rebates removed, cut to curb
exports

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."

(For more biz stories, please visit Industry Updates)

Learn Chinese, Chinese Mandarin