Lowered tax rebates to adversely affect exporters

16 Mar '07

2 min read

Export tax rebates being lowered by two percent will have a direct impact on slender profit margins of enterprises.

According to statistics, from January to November 2006, sales revenue of China's textile industry was 2.168914 trillion yuan. Product sales cost marked 1.939518 trillion yuan. Product sales taxes and extra charges were 8.36 billion yuan.

This is translated into a gross margin (sales revenue - marketing costs-sales taxes and extra charges) of 221.036 billion yuan. Gross margins rate (gross profits/sales revenue) was 10.19 percent.

Based on the total profit amount of 76.763 billion yuan, the profit margins (total profit amount/sales revenue, also known as pre-tax profit) could be calculated as 3.53 percent.

Textile industry has already been an industry with thin profit. Reduced export rebates will further squeeze its poor profit margins.

Textile industry will be facing many favorable factors in 2007. China's textile and apparel would indicate some increase over the previous year, the estimated increase would be 10-15 percent this year compared to 22 percent in 2006 as the most critical export tax rebate being lowered by two percent and RMB revaluation by five percent.

The annual export value is expected to be US $158-165 billion in 2007.

In order to achieve sustained growth, and become bigger and stronger, textile industry must realize solid industrial upgrading. Textile enterprises will be apparently polarized in 2007. Those enterprises, which are not aggressive in making progress, will be eliminated.

Fibre2fashion, News Desk - China

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