Focus: Anecdotal Rumours That Garment Export Tax Rebate Rate Is Reduced By 5%

China's textile and garment export enterprises may face themselves.

Tax rebate cake has been used, and pure foreign trade enterprises will be hit by the first round.

"If the news is confirmed, it should be a pure foreign trade company," Chen Guoping, general manager of Ningbo Banna knitting and Garments Co., Ltd., told reporters. "The profit margins of pure foreign trade enterprises are concentrated on the tax rebate. Many times, they are making orders with small profits, which is for small profits but quick turnover."

One industry insider told reporters that "most of the foreign trade enterprises are living on the basis of tax rebates, and the books are all losses, and they are sold to foreign products at a loss price. The profit is 15% of the tax rebate."

It points out that such a loss is mostly to maintain market size and not to make money or expand.

"The first three months are the impact on pure foreign trade companies," Chen Guoping pointed out. Now that the orders of the basic production enterprises have been under three months, "three months later, they will start to affect the production enterprises. After three months to six months, the foreign trade companies will start to lower prices when talking about the next order with the production enterprises, so as to raise the cost of the factory. In this way, besides closing off a batch of foreign trade companies, they will also turn off a number of factories."

By contrast, the advantage of Industrial and Trading Company with its own factory is relatively obvious. Chen Guoping said, "the reduction of these profits can be amortized to internal friction."

In addition, Industrial and Trading Company quoted tax rebates and profits separately.

This piece of cake for tax rebate will not be used for the time being. "The tax rebate will not be considered in the nuclear price. It will be determined purely as a net profit."

The industry pointed out that "if the tax rebate is reduced and profits will decline again, many enterprises will begin to consider reducing the tax revenue from Hongkong."

Controversy: advantages and disadvantages of tax rebate reduction

As the news has been uploaded in the market, although it has not yet been confirmed, there has been psychological anticipation. Chen Guoping pointed out that "as Industrial and Trading Company, it will be pressure for us to reduce 5 points, but it is still acceptable."

It is not totally unacceptable, but it needs a process. Lv Xiaoxiao pointed out that "the drawdown of tax rebate needs a process. When it comes out suddenly, the first profit is affected by our enterprises, and many of our orders have gone down."

Lv Xiaoxiao pointed out that the final result is to increase the price to the retailers, but it needs a buffer period.

The first textile network pointed out that the relevant ministries and commissions will reduce the rebate rate of garment export in April 1st, but this news has been strongly opposed by the Ministry of Commerce and the Ministry of industry and commerce.

Wang Qian, chief analyst of China's first textile network, also pointed out that in view of the fact that the current textile export faces greater cost pressures, the possibility of a sharp reduction in the short term is less likely.

According to Wang Qianjin, the global economy is still in the process of recovery, but this recovery does not have a solid foundation. It is a fragile state.

The unemployment rate in the United States is still around 9%, and the European debt crisis continues to drag on the European economy, coupled with the continuing turmoil in the international situation, the impact of the oil crisis on the global recovery, and the crisis triggered by the Japanese earthquake. All these risks are threatening the global economic recovery, making China's export prospects uncertain this year.

In terms of trade, Global trade in goods exports increased by 14.5% in 2010 (13% in 2009), the highest growth rate since the WTO began in 1950.

Global trade growth is expected to slow to 6.5% this year.

Reconsidering the acceleration of the appreciation of the RMB exchange rate, the aggravation of trade frictions, the domestic raw materials and labor force