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Further increase in export tax rebate may trigger trade disputes
Feb '09
The executive meeting of the State Council, chaired by Premier Wen Jiabao on February 4, 2009, examined and approved in principle the revitalization plan of the textile industry, exports of which are rapidly falling since the last few months.

Export tax rebate rate on textiles and garment has been increased from 14 percent to 15 percent. In addition, the state will provide credit support to enterprises that have good fundamentals but face temporary operating and financial difficulties.

The state will provide support to medium and small textile enterprise; encourage guarantee agencies to provide credit guarantees and financing services, aiming to alleviate burdens of textile enterprises.

At the same time the central government and local governments will enlarge the acquisition volumes of cotton and raw silk from the markets to help the industry, survive through the crisis at least in 2009.

The increase in export tax rebate rate is the most direct, covering all aspects and one of the most benefitting policies in the stimulation package. The export tax rebate rate availed by textile industry averaged at 12 percent in 2008, which has now touched 15 percent. .

A quick back of the envelope calculation reveals that profits are expected to increase by 25 billion Yuan, accounting for over 20 percent of total industry profits, if export tax rebate rate of the industry remains static at 15 percent in 2009.

Export tax rebate rate of the industry is unlikely to increase further in 2009, as it could trigger trade disputes with foreign countries, which are now looking for more and more reasons to set up tariff barriers to protect their own industries.

Fibre2fashion News Desk - China

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