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China Ups Export Rebatates

Beijing, China: According to the China Daily, the government has unveiled a package of tax and foreign exchange policy changes to boost exports, which saw its worst monthly decline in more than a decade in February.

The Chinese government will increase the rebate amounts for a multitude of products starting April 1, 2009. Rebates will also be stepped up for non-ferrous metals, light industrial products and information technology products, said a report on its website.

Export tax rebates will be increased one percentage point from 14 percent for textile and garment exports, the fourth rebate hike for the sector since August 2009.

The Chinese foreign exchange regulator will also raise the amount of short-term foreign debt that banks may incur by 12 percent to boost trade, in a separate move. The State Administration of Foreign Exchange (SAFE) has set a quota for the year beginning April 1, 2009, of US$32.9 billion. This move means that banks can now incur up to 12 percent more foreign debt than the previous year.

This should help Chinese exporters and importers. “The short term foreign debt should go first to big financial institutions that have huge trading transactions to maintain the steady growth of foreign trade. The move is aimed at facilitating growth in the real economy and boost trade financing,” said a spokesman for SAFE.

The tax rebate increase and letting up of short term foreign debt quotas are the latest in a series of movies to bolster the nation’s exports. Exports form one of the most important sectors of the Chinese economy.

While experts say that the measures will help exporters, it does not tackle the fundamental issues facing China’s economy. The country’s foreign trade increased 17.8 percent in 2008, or 8.5 percentage points lower than in 2007. Exports plunged 25.7 percent in February from a year earlier.

“The latest tax rebate hike will partly alleviate the woes caused by the declining demand in the international market. But it cannot fundamentally solve their problems as the main cause of their woes is the slumping overseas demand, “said Ma Li, an analyst for China Galaxy Securities.

China Trade Declines

Beijing, China: In a report by Forbes, China’s exports and imports in March has fallen, compared to 2007 levels in the same month. This marks the fifth consecutive month that Chinese exports and imports have taken a hit.

The pace of decline in exports slowed but the speed of imports has increased. Analysts are divided as to whether the worst of the contraction in trade flows may soon be over.

China’s trade surplus is now US$18. 56 billion, much higher than forecasts of US$10.4 billion: surplus figures stood at US$4.84 billion in February 2009, in January 2009 the trade surplus stood at US$39.1 billion.

Exports are down 17.1 percent from the year earlier, missing forecasts by 21.5 percent following February’s dismal 25.7 percent drop.