China to hike export rebates on 1 April to drive growth

26 March 2009 10:41  [Source: ICIS news]

SHANGHAI (ICIS news)--China's plan to offer more export rebates on an extensive list of products is an effort to confront the collapse in its exports due to the global financial crisis, analysts said on Thursday.

On 25 March, the State Council, China’s cabinet, said the government would raise export rebates effective 1 April on textiles and garments, steel, nonferrous metals, petrochemicals, electronics and light industrial products.

The government did not provide specific details about the export rebates.

"The weak overseas demand, coupled with the depreciation of the US dollar and euro, gave a serious blow to China’s exports. The government’s decision this time gives support and injects confidence to export-oriented companies," said Hou Hongsen, an analyst from Shenzhen-based China Jianyin Investment Securities, in Mandarin.

China’s exports, a key factor in its GDP growth, saw a dip for the fourth consecutive month in February due to the global economic slowdown.

In January, the value of China’s petroleum and chemical exports dropped by 29.7% to $7.2bn (€5.3bn) year on year, according to data from the China Petroleum and Chemical Industry Association (CPCIA) on 22 March.

The rebates on petrochemical products are likely to return to their higher rate, which existed before they were cut in July 2007, to stimulate exports and drive economic growth, Hou said, adding that details would likely be released soon.

The export rebates on textiles and garments would likely be increased to 16% or 17% from 15%, said Fang Jun, an analyst with Shanghai-based Essence Securities.

"I am cautiously optimistic about the rebate hike, as whether the 1% increase [on rebates for textiles and garments] could boost shipments significantly still needs to be observed," he told ICIS news.

The rebate on textile and garment exports has been increased for the second time this year. Earlier, on 1 February, the rate was increased to 15% from 14%.

China expects to achieve 8% economic growth in 2009 despite difficulties in reaching the goal, Premier Wen Jiabao said in early March.

($1 = €0.74)

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By: Judith Wang
+65 6780 4359

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