China to lower tax rebate for textile export Friday, April 13, 2007

The Chinese government is preparing to cut the export tax rebate on textile products to help balance the country's trade surplus, the China Securities Journal reported in Beijing on Friday.

The National Development and Reform Commission (NDRC) was working with the ministries of commerce and finance to set a figure on the reduction, a source was quoted as saying.

The rebate rate on textile products, covering the cotton textiles and chemical fibre sectors, might fall from 11 to nine percent, said the source, while the rate on garments would be reduced from 13 to nine percent and on chemical fibre products from nine to five percent.

The China National Textile Industry Council has lobbied to maintain the original rebate rate on textile products and reduce that on garments to 11 percent, claiming it would prevent fluctuations in exports.

A council official was quoted as saying that an immediate cut would exert "unbearable" pressure on exporters and the country's textile industry.

The government has adjusted the rebate rate on textile products and garments four times since 2001.

Analysts say low-value-added textile products and garments are major exports and often spark trade disputes. The textile industry would be a likely target in the government's campaign to suppress the trade surplus.

It is estimated the growth in garment exports would fall from 25 percent to as far as 10 percent if the rebate rate was cut by two percent. This would take 1.6 billion U.S. dollars from the revenues of exporters, given the 2007 growth rate of garment exports is likely to be around 15 percent.

Last year, customs sources said, China exported 143.99 billion U.S. dollars worth of garments and textiles, a growth of 25.2 percent, and imported 18.09 billion U.S. dollars worth, up 5.6 percent.

The United States filed a complaint with the World Trade Organization in February, alleging China was using export subsidies to help its companies, including those in the clothing sector, on world markets.

The U.S., the largest destination of China's textile and clothing exports, could impose a 27.5-percent tariff on Chinese clothing if negotiations on the issue failed to produce results.

Vice Commerce Minister Gao Hucheng said on Tuesday the government would decide on whether to readjust export rebates in accordance with market changes.

The country's trade surplus soared to 46.44 billion U.S. dollars in the first quarter, but plunged to 6.87 billion U.S. dollars in March, less than a third of the February figure.  

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Editor: Pliny Han
Source: Xinhua