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China boosts textile tax rebates to help exporters
2008-08-03
BEIJING - China boosted tax rebates on textiles and clothing Friday to help struggling exporters amid falling foreign sales, while a key indicator showed manufacturing activity slowed sharply in July. Analysts had expected Beijing to take steps to help exporters after China's export growth fell in June. Weakening demand has complicated government efforts to keep the economy growing strongly while also cooling inflation that is battering Chinese families. Rebates of value-added taxes on exports of textiles and clothes will rise by 2 percentage points to 13 percent, effective Friday, the Finance Ministry said on its Web site. Beijing repealed tax rebates on hundreds of products last year to help slow export growth and narrow its swollen trade surplus. But textile and clothing factories employ millions of workers and a drop in exports has raised the threat of job losses. Textile exports fell 4.2 percent in June from the same month last year. Overall exports rose 18.2 percent, down from May's 28 percent growth rate. In a sign of possible wider problems, the official China Federation of Logistics and Purchasing said Friday its purchasing managers' index -- a broad measure of industrial activity that includes new orders, exports and other factors -- fell to 48.4 in July, its lowest level since the survey began in 2005. The figures were weaker than expected and show that "economic activities are slowing sharply in China's manufacturing sector," said Lehman Brothers economist Mingchun Sun in a report to clients. Chinese manufacturers and exporters are suffering from higher costs for energy and raw materials, weaker global demand and a rise in China's currency, the yuan, that makes their goods more expensive in the key U.S. market. Many exporters sell shoes, toys and other goods that face intense competition from other low-cost producers. Analysts have expected Beijing to help exporters with targeted measures such as tax rebates while trying to cool inflation by maintaining lending curbs that have been steadily tightened over the past two years. Inflation eased slightly in June but consumer prices still were up 7.1 percent from the same month last year. That was a decline from May's 7.7 percent rate but well above the official target of 4.8 percent for the year. Communist leaders are especially worried about inflation because it hits China's poor majority hardest, raising the threat of protests. The government has imposed price controls on basic food items but is trying to avoid steps that might hurt economic growth. Meanwhile, the Finance Ministry said China on Friday scrapped rebates of value-added taxes on exports of pesticides, batteries, zinc and paint. It gave no reason, but Beijing is trying to conserve energy and cut pollution by curbing exports of goods whose production is deemed too dirty or resource-intensive. ___ On the Net: Chinese Finance Ministry (in Chinese): http://www.mof.gov.cn China Federation of Logistics and Purchasing (in Chinese): http://www.chinawuliu.com.cn
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