Business

China is raising tax rebates for certain exports to help producers cope with smaller profit margins as a result of slacking market demand, the yuan’s appreciation and rising production costs.

Those rebates will start from Nov. 1, according to a circular on the website of the Ministry of Finance (MOF) on Tuesday.

The adjustment involves 3,486 items from labor intensive industries such as textile, garment, toy, hi-tech and high added value sectors like anti-AIDS drugs and tempered glass. Those items account for 25.8 percent of what’s covered by the country’s Customs Tariffs.

The new rebates are classified into six categories: five, nine, 11, 13, 14 and 17 percent.

For example, the export tax rebate for some toys, textiles and garments will be raised to 14 percent. There will be a nine percent rebate for certain plastic products, 11 percent for daily necessities and porcelain artifacts, 11 and 13 percent for some furniture.

According to an unnamed MOF official, the rebates will ease operation pressure for export enterprises and enhance their competitiveness. He added the adjustment would also have a positive impact on the development of the national economy.

Because export industries will have more money as a result of the rebate increase, China is hoping they will be able to withstand the world’s financial crisis.

The MOF official also said the additional money could be used to accelerate industrial upgrades at hi-tech enterprises.

The world’s financial situation, rising production costs and a stronger Renminbi dented export growth of China’s enterprises. From January to September export growth was down 4.8 percent from the corresponding period of last year.

Garment and accessory exports in the same period were US$87.1 billion , up 1.8 percent year-on-year. However, the growth rate was down 21.2 percent from the same period last year.

From January to July, toy exports stood at US$4.18 billion, up 2.1 percent from the same period last year but the growth rate fell 22.7 percent, according to the latest statistics from China Customs.

(Xinhua News Agency October 22, 2008)

China will take multiple steps to combat the falling price of cotton, according to National Development and Reform Committee (NDRC), the country’s top economy planner.

Market statistics showed that the purchase price of standard cotton averaged 12,553 yuan per tonne (1,838 US dollars) on Tuesday. That is 68 yuan lower than the previous trading day.

The figure was down 677 yuan or 5.1 percent from the same trading period last year.

“Both short-term and long-term measures are needed to stabilize the price of cotton, so as to protect the nation’s cotton production as well as the interests of farmers,” said NDRC’s trade and commerce official Ma Zhanping at a cotton forum on Monday.

According to Ma, the country will encourage commercial banks and rural credit institutions to provide more loans to fund cotton purchases.

China is also expected to purchase more cotton and put it in a state reserve in the Xinjiang Uygur Autonomous Region in hopes of slowing down falling cotton prices.

Xinjiang is China’s largest cotton producer. Its output accounts for 36 percent of the country’s total cotton in 2007.

As of August 2008, state departments had purchased 65,800 tonnes of cotton.

Ma said the country was also working on a plan to strengthen financial support for farmers, which could include subsidies.

“The textile industry has been suffering from shrinking global market demand. By giving subsidies to farmers, we could support the cotton industry while avoiding putting more pressures on textile and garment manufacturers,” said Ma.

(Xinhua News Agency October 14, 2008)

China’s clothing and textile industry, the world’s biggest garment and shoe supplier, faces a worsening operating environment as the global financial crisis cuts demand and a rising currency erodes profits.

The deepening credit crunch could hurt China’s exports, and the subsequent bailouts by Western governments will likely increase the relative value of China’s currency, curbing exporter profits, Sun Huaibin, director of the China Textile Economy Research Center, said yesterday at a conference in Jinan, Bloomberg News reported.

The clothing and textile industry employs 20 million mainly rural workers, a seventh of the country’s industrial labor force, according to the China National Textile and Apparel Council. The industry’s slowdown may complicate China’s goal of maintaining faster growth and boosting domestic consumption.

“There is a colder winter ahead of us,” Sun said. As the export demand slide seems to be “gathering momentum,” there is little hope for the industry’s prospects to improve this year, and the “bottom” may not appear until at least the first half of 2009, he said. The yuan has gained more than 10 percent against the dollar in the last year.

China’s exports of clothing and apparel only grew 1.8 percent in the first nine months, a decline of 21 percentage points compared with the growth rate at the same time in 2007, the Customs agency announced yesterday.

Investments in the sector are also slowing after the government this year tightened lending, Sun said. About two-thirds of small to medium textile producers are in financial difficulties, according to Chairman Du Yuzhou, of China National Textile.

(Shanghai Daily October 14, 2008)

More than 2,000 companies have established themselves in cashmere manufacturing in the Chinese mainland and hold a dominant position in global exports, but the industry seeks to shift from a reliance on exports to domestic sales.

The Erdos Group, the top cashmere manufacturer in China, has cut its original export plan from 4.5 million garments to 2.5 million this year. It will invest 800 million yuan (US$117 million) in the domestic market over five years to set up 100 flagship shops.

Xinjiang Tianshan Wool Tex Stock Co Ltd for the first time combined its international and domestic order fairs into one event and held it in Urumqi, capital of Xinjiang Uygur Autonomous Region, hoping to boost domestic sales to equal its exports.

The industry is shifting focus because of a paradox. It has ramped up production capacity and dominates the world market, but it has a weak position in negotiating prices with foreign dealers.

China supplies more than 75 percent of the world’s cashmere and 90 percent of the high-quality goat cashmere, according to the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce & Animal By-Products.

After more than 20 years of development, China’s cashmere industry can turn out 40 million items annually. Last year, it exported 20.37 million cashmere garments, worth US$623 million.

The country has shifted from a major exporter of cashmere raw material to a production base for finished products, Bian Zhenhu, vice-president of the chamber, told a summit of major cashmere makers in July.

But many firms found that being dominant in resources as well as manufacturing didn’t translate into a strong position in the global markets.

The value of the expensive material, dubbed “soft gold,” has not been reflected in export prices. The average export price of a cashmere garment was only US$30.58 in 2007. A stronger Chinese currency helped push the average price up to US$32.50 in the early months of this year.

Erdos Group sold 4.6 million cashmere garments last year with exports worth 1.1 billion yuan - but a profit of only 10 million yuan.

Compared with the global market, the domestic market is looking better.

“The profit margin is less than 10 percent in the export-oriented processing trade but could be kept at about 40 percent to 50 percent for domestic sales,” said Chen Tao, chairman of Beijing Snow-Lotus Cashmere Co Ltd.

“A simple calculation shows that a cashmere garment sold in the domestic market would bring the manufacturer a profit four times larger than if exported,” said Chen.

(Xinhua News Agency September 8, 2008)

The export delivery value of the Chinese textile industry totaled 435.2 billion yuan ($63.56 billion) in the first seven months of this year, up 7.9 percent year-on-year, said the National Development and Reform Commission on Tuesday.

Yet the growth rate was eight percentage points lower than the previous year.

Industry experts attributed the decline to the appreciation of the yuan and the weakening demand of major consumption countries, according to Shanghai Securities News.

Garment exports to the United States, one of the major importers of Chinese garments, for example, increased only six percent in June.

The downtrend of Chinese textile exports will last in the short run, said Shanghai Securities News, quoting industry experts. It depends on the trend of the appreciation of the yuan and the US consumption demand.

The Ministry of Finance increased tax rebate rates on some textile and clothing exports from 11 percent to 13 percent from August 1. Experts believed that the policy would be a great impetus to textile exports in August and many textile and garment companies have postponed their export orders to enjoy more preferential rate.

During the January-July period, China produced 12.2 million tons of yarn, 31.8 billion meters of fabric, 14.02 million tons of chemical fiber and 11.5 garments, up 10.8 percent, 6.7 percent, 4.8 percent and 6.2 percent year-on-year respectively, the commission said.

(Chinadaily.com.cn September 3, 2008)

Yuan appreciation and recession in the West are driving Chinese textile makers to shift focus from exports to the domestic market.

Most Chinese textile makers, attending the ongoing China International Trade Fair for Home Textiles and Accessories in Shanghai, are keen to explore the domestic market to cope with declining profits.

“We have decided to start selling in the domestic market this year,” said Lu Wei, sales manager of Shanghai Homeland Textile Co Ltd, yesterday.

“The fair may help us explore other income avenues, especially after the yuan revaluation last year led to a 30-percent drop in profits,” Lu said.

His company, which earlier manufactured textile equipment and had annual sales of 100 million yuan (US$14.71 million), aims to achieve a turnover of 5 million yuan from domestic sales in the coming years by selling fabric to local distributors.

China’s labor-intensive home textile industry saw a 30-percent growth year on year since 2003, fueled by a buoyant overseas market.

But textile exports slowed down significantly last year, leaving most home textile makers to struggle with declining sales and profits. A stronger yuan during this period meant lower returns for exporters.

In August, the government gave more export tax rebates to textile and garment manufacturers, but those in the industry say it is not enough to cover the losses incurred due to weak demand, soaring labor and raw material prices and stiff competition within a highly fragmented industry.

Some textile manufacturers, however, remain upbeat. “Rapid economic development in China has boosted people’s income and created a demand for high quality textiles. We hope the rise in prosperity will help the domestic market,” said Hu Xinggang of Hangzhou Xiaoshan Phoenix Textile Co Ltd. The company hopes to lift domestic sales from the current 10 percent to up to 40 percent.

Nearly 909 textile makers from home and abroad attended the trade fair at the Shanghai New International Expo Center in Pudong.

Organizers said it has increased the number of buyers from domestic department stores and shopping malls this year. More than 200 “sourcing officials” from 10 cities were invited to the fair for the first time.

(Shanghai Daily August 28, 2008)

The rate of growth in the output of major textile enterprises slowed sharply, to single-digit levels in some cases, in the first seven months of 2008, the China National Textile and Apparel Council said on Monday.

The council said the deceleration reflected slowing textile exports and a cooling global economy.

From January to July, chemical fiber production rose 4.76 percent from a year earlier, but that was 13.23 percentage points less than the growth rate during the same seven-month period last year, the lowest growth rate since March 2006.

Yarn production grew 10.78 percent during the period, but that was 9.41 percentage points less than a year earlier.

The output growth of the cloth and garment sectors fell 7.45 and 7.92 percentage points, respectively, from year-earlier rates of 13.9 percent and 14.1 percent.

(Xinhua News Agency August 25, 2008)

Foreign sales of Chinese textiles and garments grew at a single-digit pace in the first seven months, compared with the year-on-year growth rate of 24.4 percent for the same period last year, the General Administration of Customs said on Tuesday.

Mounting production costs and weak demand abroad combined to account for the slowdown, industry observers said.

Between January and July, China exported 100.36 billion U.S. dollars worth of textiles and garments, up 7.67 percent, but well down from the 24.4 percent growth rate for the same period last year.

The total included 62.49 billion U.S. dollars worth of garments and accessories, up 3.4 percent, and 16.55 billion dollars worth of shoes, an increase of 14.2 percent. The growth rates were 19.6 percentage points and 4.3 percentages points lower, respectively, than the year-earlier level.

China recently increased the tax rebate to 13 percent for textile and clothing exports to bail out its more than 60,000 struggling smaller textile enterprises.

Zhang Bin, a Guojin Securities analyst, said the effects of the new tax rebate policy would likely take hold in October. It was expected to help reduce costs and increase the profit margins of textile and clothing exporters.

(Xinhua News Agency August 13, 2008)

Major Chinese textile companies have said that the recent adjustment in tax rebates will lead to increased profits in the short term, but the long-term impact would be limited.

Jiangsu Sainty Corp Ltd, a major exporter of garments based in Jiangsu province, said in an announcement: “The export tax rebate adjustment will increase the profitability of contracts signed before in the short term,” but will have “no major influence” on the company’s profits for the whole year.

While the company acknowledged the positive impact the tax rebate would bring, it said the competitive nature of the garments industry and other factors such as a group’s ability to bargain and the development of the domestic and international markets, would also affect profits in the sector.

Jiangsu Kaiyuan, another major trader in the textile industry, said there would not be any obvious impact on the company’s profits since foreign clients would try to cut down prices once they learn about the tax rebate.

Zhao Meiling, an analyst with Essence Securities, agreed that the tax adjustment was good news in the short term, but would not change the overall trend of the industry.

Zhao said the adjustment could help release the pressure of SMEs relying heavily on exports. But since China’s textile industry overall lacks brands, and they mainly make low value-added products, they possess little bargaining power and the profits from the tax rebate would go to foreign importers rather than the domestic enterprises themselves.

He said technology innovation and industry upgrades were the only ways for the industry to develop in the long run.

The Ministry of Finance increased tax rebate rates on some textile and clothing exports from 11 percent to 13 percent in the first pullback since the country largely cut the enterprise export tax rebate rate in September 2006.

The policy was meant to give a breather to enterprises whose profits have declined since the beginning of this year amid global economic slowdown, yuan appreciation and rising labor and raw material costs.

Data shows that in the first half of the year, exports of textile and apparel totaled $83.851 billion, an increase of 11.11 percent over the previous year.

(China Daily August 13, 2008)

China will raise export tax rebates for textiles and clothing from 11 percent to 13 percent starting Aug. 1, the State Administration of Taxation (SAT) and the Ministry of Finance (MOF) said in a joint statement released on the SAT’s Web site.

The Chinese government cut the textile export tax rebate on September 15, 2006 from 13 percent to 11 percent to reduce the surging trade surplus at the time.

However, Chinese export enterprises have faced unexpected challenges since early this year, including increasing raw material prices, accelerated yuan appreciation and a global economic downturn. Thus, export enterprises have been calling for a loosening of trade control policies.

The government is also looking into this matter. The country’s top leaders have made several trips to Zhejiang and Jiangsu, the nation’s major textile exporting provinces.

In early July, Minister of Commerce Chen Deming visited Wenzhou in Zhejiang to check the business and trade situation of the city’s textile industry. Two days later, Vice Premier Li Keqiang paid another visit to Wenzhou, also to assess the performance of local textile and clothing companies.

After these visits, the Ministry of Commerce (MOC) reportedly made official suggestions to the State Council to increase export tax rebates for certain products. Since then, industry rumors have circulated saying that the government will soon raise the export tax rebate for textiles and clothes.

In the joint statement, the SAT and MOF said that the export tax rebate increase won the approval of the State Council.

The export tax rebate for garment was also increased to 13%, according to the joint statment.

(China.org.cn by Yan Pei, July 31, 2008)