China Raises Export Rebate Tax Again
According to China Business News:
In its latest move to stimulate the export-oriented economy, the Ministry of Finance announced a one per cent tax rebate increase, state media reports. It’s the second raise this year.
Producers of textiles and clothing will benefit from a 14 per cent tax rebate starting from November 1, the Ministry of Finance said in a statement. The government will raise export tax rebates for 3,486 products including textiles, clothing, furniture and toys. In July, the tax rebate was raised from 11 to 13 per cent to help exporters cope with lower demand. Rebates lead to lower costs for producers but they do not directly affect demand from overseas. “The move may help some companies, but how much it benefits exporters remains questionable as the trend of shrinking foreign demand is unlikely to reverse,” state media quotes Tang Jianwei, an analyst with Bank of Communications.In the first nine months of 2008, exports grew 22.3 per cent year-on-year, almost five per cent less than a year ago. [Italics mine]
If this continues, the only option will be that exporters will have to cut into profit margins.