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China Bolsters Textile, Apparel Makers

China’s State Council on Wednesday agreed to raise rebates on export taxes for textiles and apparel.

BEIJING — Responding to industry calls for action to help offset declining orders and stem the tide of factory closures, China’s State Council on Wednesday agreed to raise rebates on export taxes for textiles and apparel.

This story first appeared in the February 5, 2009 issue of WWD.  Subscribe Today.

The official Xinhua news agency reported that the State Council, the country’s central cabinet, agreed to raise export tax rebates to 15 percent from 14 percent, but had not set an implementation date. This marks the third increase in rebates on export taxes for textiles and apparel since August. The move comes in the wake of thousands of factory closures in recent months, as companies already operating on thin profit margins fall to declining demand from the U.S. and Europe amid the global financial crisis.

The growth of China’s textile and apparel exports fell dramatically last year, according to the central customs agency. In 2008, sector imports grew by about 8 percent, compared with 18.9 percent growth a year earlier. Last year brought exponentially higher costs with a new labor law, rising prices for raw materials and other factors.

Now many companies are scaling back production lines, laying off workers and reducing hours. Earlier this week, central government officials said the loss of 20 million jobs from China’s migrant workforce could pose a threat to social stability in poor, rural areas.

Industry groups had no immediate comment on the news that the export tax rebates had been increased again, but had earlier called for rebates of at least 15 percent.

And Xinhua predicted further industry reforms are on the horizon.

“The government would also announce steps intended to phase out obsolete capacity; eliminate energy-intensive, polluting equipment and technology, and encourage textile and garment makers to relocate from southeastern parts of China to central and western areas,” the agency wrote, without providing details.