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Further tax breaks to have little or no meaning

01
Dec '08

Although not being part of the country's economic lifeline, China's textile and light industries create a large number of jobs, so a series of major difficulties experienced by these two sectors have caused increasing concern within the Chinese government. A few days ago, the State Council executive meeting identified six policies and measures to address their difficulties. The policies first mention the need to develop revival plans for several industries, including light and the textile industry.

No doubt, China's textile industry has experienced unprecedented difficulties. According to data released by the General Administration of Customs, China's textile and garment exports in the first ten months of this year amounted to US $153.717 billion, up 5.89 percent year-on-year, but growth rate fell 5.19 percentage points from the first half of this year, and down 13.84 points year-on-year, a 6-year low. By removing the impact of the Spring Festival in February, China's textile export growth rate has declined for 9 months, depicting a worsening trend in exports from January to date.

In October this year, exports of textiles and garments scored US $16.75 billion, up 9.32 percent year-on-year, but down by nearly US $13 billion from the previous month or 6.94 percent. At present, the country has attached great importance to the situation and has frequently introduced policies to enhance confidence and support those enterprises in plight. Though the new sops have to a certain extent alleviated the difficulties of manufacturing sector, the status quo of their survival has not changed completely.

Retention of jobs has become very important in these turbulent times, however for a large number of small enterprises in the two sectors, it will be difficult to implement support policies for employees if the situation worsens further. Some experts have pointed out and admit that at present the main problem of slowdown in demand does not rest at the doors of China.

With declining textile demand from Europe and the United States, it will be no good for China to introduce more policies. It will have very little meaning to further increase export tax rebate rates, because half of the proceeds brought about by the increase, will go into the pockets of the buyers, so the best way is for the Renmibi to depreciate appropriately.

Fibre2fashion News Desk - China

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