Friday 13 March 2009

How to Save the Export Sector

Trade expert Song Hong provides his vision of how China can bolster its ailing export sector.

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Guanyu said...

How to Save the Export Sector

Trade expert Song Hong provides his vision of how China can bolster its ailing export sector.

Caijing
13 March 2009

What can China do to support export companies, especially small and medium enterprises (SMEs), in the financial crisis?

Song Hong, director of the World Trade Research Center at the Chinese Academy of Social Sciences, said that China might have become the largest export country in the world in 2008. China should value and maintain the export market share that it has already seized. It would be a pity if some companies gave up their overseas market only due to the financial crisis, he said.

Song also suggested measures to support the export sector.

Song first recommended increasing the export rebate to half of the total tax levied on a product. While many aspects of the export rebate will provide timely and effective aid to domestic enterprises, the current rebate cannot stimulate enough overseas demand, he said.

He said increasing the export rebate would help sustain nearly bankrupt companies. The revived enterprises would create more jobs, which would in turn increase domestic demand. The export rebate should not be regarded as trade protectionism because it does not break any WTO rules, he said.

Next, Song said that tightened credit policies limited regular export activity. He recommended that the government subsidize interest fees to reduce the gap between SME and large companies’ cost of credit. He also said that the government should guarantee credit for SMEs. Presently, SMEs face higher costs and greater vulnerability to risk, relative to large enterprises.

Additionally, Song said that apart from emergency measures, the government should keep a long-term strategy in mind. “Even without the financial crisis, some enterprises would still face industry updates and the risk of become obsolete,” Song said.

The government should encourage enterprises to prepare for and push forward IPOs.

In its long-term strategy, the government should remain vigilant of trade policy changes in order to prevent the revival of less competitive industries.

At the same time, China should encourage service industries such as finance, transportation, accounting, and technical training to follow the production industry abroad.

“China, as a large trade country, cannot behave like what it was – a follower. It should take a more active role in promoting and maintaining the world economic order. We are expecting China to push the Doha Talks forward at the G-20 Leaders Summit next month, and this will benefit the world during financial and economic crisis,” Song said.