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Govt may adopt policies in conformity to ailing businesses
Aug '08
With Olympics coming to a close, a few of the economically troubled companies are now focusing their attention on the economic policies to be implemented by the government.

Experts believe that the state-policy would not be directed towards a broad base of the industry sector, but would rather lean towards the smaller section of troubled businesses who are finding it difficult to cope with ongoing problems.

With effect from this month, the State Revenue Bureau and the Ministry of Finance have increased the export tax rebate rate to 13 percent for textile and clothing, while for bamboo products it has been raised to 11 percent.

Over the years, quality of the textile products had failed to mark any improvement and enterprises had depended on cheap labor to compete with each other through low-priced exports. However, this not only undermined the reputation of the country but had also led to the imposition of anti-dumping cases by foreign client countries. The Government had therefore decided to reduce the export tax rebate rate last year from its original 13 to 11 percent, thereby targeting the labor-intensive industries.

Although the long-term macro control is found to have been effective and well suited, the short-term policy still needs fine adjustments and must be based on actual situation. The policy adopted should be such that it encourages enterprises into industrial integration propelling them to improve technology through policy adjustments. It should also provide them with a relatively relaxed environment, allowing them to survive and then taking them to an advanced level.

Statistics from the SMEs Department of China's State Development and Reform Commission clearly showed that in the first half of 2008, nearly 70,000 well performing and export oriented SMEs closed down. Most of these were concentrated in Southeastern coastal areas from where the surge spread to other regions.

Even now, a number of export oriented enterprises in the Yangtze River Delta and the Pearl River Delta are facing difficult times. While the former accounts for 22 percent of China's gross domestic product (GDP) the latter accounts for 10 percent.

It is therefore evident that unless proper policy measures are undertaken, the industrial sector of China is unlikely to grow or develop to compete with other nations.

Fibre2fashion News Desk - China

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