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Monday, 10 November 2008
Tax rebates prop up exporters but risk igniting friction with trade partners
The country’s exports have become a lightning rod for government concern as slowing overseas shipments will cost the labour-intensive sector millions of jobs and undermine one of the nation’s major growth engines.
Tax rebates prop up exporters but risk igniting friction with trade partners
Daniel Ren 10 November 2008
The country’s exports have become a lightning rod for government concern as slowing overseas shipments will cost the labour-intensive sector millions of jobs and undermine one of the nation’s major growth engines.
The worsening financial crisis in the United States and the appreciation of the yuan have already hurt mainland exports, prompting economists to urge the government to take drastic measures to bail out ailing manufacturers of inexpensive goods.
According to the Ministry of Commerce, China exported goods worth US$136.4 billion in September, 21.5 per cent higher than for the same period a year ago.
However, economists have pointed out that the real growth rate was only a single-digit figure.
The stronger yuan and soaring inflation at home have made mainland products expensive in overseas markets, in turn helping dress up the monetary value of the overseas shipments.
The dismal situation in Dongguan, southern Guangdong, tells the story.
The region, which is home to thousands of export processors, has fallen victim to shrinking orders from abroad; at least 10 small and medium-sized firms have gone bust.
The closure of the companies has created a serious unemployment problem on the mainland and has compelled Beijing to provide financial support to avoid social disunity.
The Ministry of Finance has increased rebates of export value-added tax on more than 3,000 products to ease the burden on the small plants, enabling them to mark down prices to boost sales to overseas buyers. The new policy took effect on November 1.
The mainland’s labour-intensive industries, including textile, garment, toy and furniture manufacturing, are to receive a boost from the additional tax refund.
Wang Liming, a director at the Ministry of Industry and Information Technology, said recently that the central government would encourage more bank loans to small factories as well as raise the rebate rates further to shore up exports.
On the flip side, Beijing’s move may trigger a new round of trade frictions with western countries, as they seek to safeguard their own interests.
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Tax rebates prop up exporters but risk igniting friction with trade partners
Daniel Ren
10 November 2008
The country’s exports have become a lightning rod for government concern as slowing overseas shipments will cost the labour-intensive sector millions of jobs and undermine one of the nation’s major growth engines.
The worsening financial crisis in the United States and the appreciation of the yuan have already hurt mainland exports, prompting economists to urge the government to take drastic measures to bail out ailing manufacturers of inexpensive goods.
According to the Ministry of Commerce, China exported goods worth US$136.4 billion in September, 21.5 per cent higher than for the same period a year ago.
However, economists have pointed out that the real growth rate was only a single-digit figure.
The stronger yuan and soaring inflation at home have made mainland products expensive in overseas markets, in turn helping dress up the monetary value of the overseas shipments.
The dismal situation in Dongguan, southern Guangdong, tells the story.
The region, which is home to thousands of export processors, has fallen victim to shrinking orders from abroad; at least 10 small and medium-sized firms have gone bust.
The closure of the companies has created a serious unemployment problem on the mainland and has compelled Beijing to provide financial support to avoid social disunity.
The Ministry of Finance has increased rebates of export value-added tax on more than 3,000 products to ease the burden on the small plants, enabling them to mark down prices to boost sales to overseas buyers. The new policy took effect on November 1.
The mainland’s labour-intensive industries, including textile, garment, toy and furniture manufacturing, are to receive a boost from the additional tax refund.
Wang Liming, a director at the Ministry of Industry and Information Technology, said recently that the central government would encourage more bank loans to small factories as well as raise the rebate rates further to shore up exports.
On the flip side, Beijing’s move may trigger a new round of trade frictions with western countries, as they seek to safeguard their own interests.
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