Rebate increase in response to weakening European demand

NANCHANG / SHANGHAI - Export tax rebates will be increased this year in response to an export decline triggered by the European debt crisis.

The move, which Commerce Ministry officials said will be implemented when the time is appropriate, will be the first increase since 2009.

"We are studying the launch of relevant measures" to stabilize export growth, said Zhong Shan, deputy minister of commerce, at the 2012 China Imports and Exports Work Conference held in Nanchang in East China's Jiangxi province on Monday.

"Uncertainty and instability in the global economic scene are growing - there are also some domestic factors," Zhong said.

According to the General Administration of Customs, exports declined 0.5 percent over the year to January, the first fall in more than two years. Officials from the ministry have stated that exports face challenging times.

China will, "at the appropriate time, increase tax rebates on specific categories of goods, including labor-intensive products", Zhong said.

From 2008 to 2009 when the financial crisis hit, China raised export tax rebates seven times on a wide range of goods.

Tax rebate rates in general were increased to 13.5 percent in 2009 from 9.8 percent before the crisis.

"The situation is getting more severe with a double-digit decline in export growth expected in the first quarter," said Da Jiaxiang, deputy director of the department of commerce in East China's Jiangsu province, one of the nation's top textile exporters.

"We are expecting preferential policies on tax rebates."

In South China's Guangdong province, a key export region, companies said they were experiencing a difficult time.

As an exporter of Christmas presents, Guangzhou Kingway Gifts felt the consequences of the sluggish global economy as it suffered a 30 percent fall in sales last year.

"Higher export tax rebate rates would help us get through the difficult patch and prevent the hardest-hit from going bankrupt," said Shen Hui, the company's general manager.

Currency policies will also be stabilized, Zhong said, to help companies cope with currency fluctuations.

During a recent visit to Guangdong, Premier Wen Jiabao said that China will try to maintain basically "stable" foreign trade policies, adding that any adjustments, if made, should be more "encouraging than restrictive".

The measures will help maintain growth, Wang Shouwen, director of the department of foreign trade with the Ministry of Commerce, said.

The relevant measures and policies will help export growth to possibly reach 10 percent this year, he said.

While the outlook for developed economies is grim, China will "prioritize emerging markets", Zhong said.

China's exports in January to the EU, the largest destination for made-in-China goods, fell 3.2 percent year-on-year as the EU sovereign debt crisis slashed demand of Chinese goods.

Emerging markets

However, shipments to the emerging markets, such as Brazil, surged during the same period.

But tapping emerging markets does not mean giving up on developed ones, Zhong said.

"They (developed markets) are still much too important for us," he said.

Zhong also urged exporters to move to inland areas.

"China's central and western regions will also be strategically important" in stabilizing exports over the next five years, Zhong said.

By 2015, the ratio of the foreign trade stemming from central and western regions, when set against the rest of the nation, will "rise by 5 percentage points", he said, without revealing the current ratio.

Relocation has proven to be an effective tool in slashing costs for exporters. Wenzhou-based shoe maker China Juyi Group has moved some of its manufacturing lines from Zhejiang to Anhui province, where labor and land costs are lower.

"Many enterprises in Wenzhou are doing the same while costs in the eastern coastal areas surge," said Luo Li, Juyi's deputy general manager.

Guangzhou Jia Yu medical equipment Limited