Textile And Garment Export Tax Rebate Rate Increase: Temporary Solution

Long drought is only a thunder shower.

The textile industry has finally waited for the long-awaited good.

On the afternoon of July 31st, the Ministry of Finance and the State Administration of Taxation issued the notice on adjusting the export tax rebate rate for some textiles and garments. Since August 1, 2008, the export tax rebate rate of some textiles and clothing has increased from 11% to 13%.

According to the introduction of Wang Rong, a joint securities analyst, the scope of the adjustment covers 50-56, 59-63 of the customs duties in 12 chapters, covering most textiles and all clothing items.

There were rumors in the early market that the export rebate rate of viscose fiber will increase from 5% to 13%, but it is found that viscose fibers are not included in this adjustment.

"Viscose fiber is the only product of textile and garment industry that is classified into two categories: high energy consumption, high pollution and resource based products."

China's first textile network editor in chief Wang Qian said, "viscose fiber production process may cause some pollution, at the same time the energy consumption is also high, this is not included in the export rebate rate of the important reason for the return of the return."

But this policy is undoubtedly a timely relief for the textile industry as a whole.

Since the beginning of this year, the textile industry has been having a bad time under the combined effect of RMB appreciation, rising labor costs and slowing demand.

"This is the most severe year I have been engaged in the textile industry in 30 years."

When Premier Wen Jiabao investigated the first cotton mill in Wuxi in July, Li Guangming, director of the factory, spoke frankly to the prime minister.

According to Guotai Junan's statistical data, 1-5 months this year, there were 10498 loss making enterprises in the industry, with a loss of 22.85%.

Industry sales revenue and profit growth rate decreased by 7.24% and 32.03% respectively over the same period last year.

"According to preliminary estimates, this adjustment will bring about 10 billion yuan profit to the textile industry."

Wang Qian, editor in chief of China's first textile network.

On the second day of the notice, a number of large export companies also responded positively. Kim Fei Da said, "the net profit of the company will increase by 4 million yuan to 5 million yuan in the second half of the year", and the shares of Fu Tian also indicated that the profit in the second half of this year will increase by about 15 million yuan.

"Just a shot in the arm, temporarily relieving the pain," said Gao Yong, vice president of the China Textile Industry Association.

Li Zhixian, an analyst at Guotai Junan, said, on the one hand, the plight of the textile industry is the result of the comprehensive effect of various reasons. The export slowdown is only one of them. On the other hand, since the export enterprises in China do not have the advantage in bargaining power, foreign customers are likely to take the opportunity to reduce prices after the implementation of the export tax rebate policy, so the preferential tax rebate increase can not be fully enjoyed by domestic enterprises.

Therefore, raising the export tax rebate rate is only a short-term and temporary help to textile enterprises, "a buffer period for textile enterprises", Wang Rong said.

It seems that there is only a thunder shower, and the effect is not sustainable.

Preventive measures are not effective but half advantages and disadvantages.

"The fundamental problem of the textile industry is that the cost pressure is too great."

Wang Rong, who has just gone to Fujian and other places, has studied the textile industry before.

She analyzed that since the beginning of this year, the price of raw materials has gone up considerably, and the cost of labor has increased sharply after the implementation of the new labor law.

In addition, Wang Rong also said that because of rising costs and tight money, financing difficulties and shortage of funds occurred frequently, leading to chain reaction on the upstream and downstream enterprises. These are the main factors of the textile industry's difficulties this year.

In addition, the low value-added products and low gross profit margins have been a chronic disease in the textile industry. Although the pace of industrial upgrading is accelerating in recent years, it is still unable to fundamentally reverse the industrial structure.

In addition, the appreciation of the renminbi is also a "force majeure" that the textile industry has to face.

The above factors are like a mountain of pressure on the top of the textile industry, making the textile industry difficult.

In this way, the increase of the export tax rebate rate of 2 percentage points can only be regarded as moving several rocks on a large mountain to the development of the whole industry.

Although pressure is eased in the short term, in the long run, it is only a temporary solution.

Of course, under the macro environment of "maintaining stability", it is also very hard for the state to introduce this policy.

Li Zhixian said: "this policy is of positive significance for reducing employment pressure and maintaining social stability."

He went on to analyze that the textile industry had a greater contribution to foreign trade and could solve the employment problem of about 20 million people a year, so the policy played a key role in ensuring a more stable industry environment.

Anxin securities also believes that the policy can help enterprises overcome the current difficult times, provide a buffer period for the healthy and steady upgrading of the whole industry, and avoid the sharp impact of many internal and external factors to bring a devastating blow to the industry.

But most analysts believe that in the long run, this policy has a certain inhibitory effect on the industry adjustment.

According to the calculation of China's first textile network, the dependence on foreign trade of the above scale enterprises in garment industry is about 24%, while the dependence on small and medium-sized enterprises under the scale is 55%.

Therefore, Anxin Securities believes that the increase in the export tax rebate rate will enable small and medium-sized garment enterprises to "bring the dead back to life", which is clearly an industry policy that is against the industry's survival of the fittest and speeding up industrial upgrading.

In addition, Anxin securities also mentioned that because the policy involves only the textile and garment industry, and the labor intensive footwear and toy industry has not been involved, it may cause complaints from these industries. If the labor intensive industry as a whole raises the export tax rebate rate, it will affect the pace of China's export structural adjustment.

In addition, the market generally believed that the export tax rebate rate of textile industry will increase by 2 percentage points, and the clothing industry will increase by 4 percentage points.

This less than expected adjustment shows the "national fine-tuning policy" and the determination to stabilize the market, said Hua Hai analysis.