Export Tax Rebates Or Textile Industry Will Be Raised

China's textile industry is encountering "the most difficult year in nearly ten years". Since 2004, in order to reverse the huge trade surplus and alleviate the pressure of fiscal deficit increasing year by year, the state has lowered the export rebate rate of the textile and garment industry for the two time, so as to promote the restructuring of the textile industry.

However, after two years of market practice, this policy still has little effect, but it suffers from the "cold winter" situation in the textile industry.

In June 11th, a news came out in a media that the newly established Ministry of information and industrialization issued a letter to resolve the current difficulties faced by the textile industry, and is actively soliciting opinions from all sides.

The "opinions" include the textile export rebate rate from 11% to 13%, the export rebate rate from 11% to 15%, the cotton import slip tax reduced to 570 to 357 (equivalent to 5% to 3%), which has been implemented since June 5th, to exempt some textile machinery and automatic winding machines from customs duties, take measures to moderately slow down the appreciation rate of the RMB exchange rate, and appropriately solve the problems of liquidity in the textile and garment industry.

Insiders said that if the suggestion in the opinion was finally approved by the relevant ministries and commissions, then the difficult situation of the textile industry could be alleviated, and the "warm winter" in the textile industry would see a warm sunshine.

The collapse of the wave came one after another. At the beginning of this year, "cold winter" in China's textile industry, from south to north, many small and medium-sized private enterprises like Domino have collapsed.

Thousands of textile enterprises went bankrupt in Changshu and Suzhou, Jiangsu, and some of them were suffering from stop production or half stop production. In the Pearl River Delta region, thousands of small and medium-sized shoe enterprises went bankrupt, and dozens of businesses collapsed on average.

Not long ago, a reporter from Phoenix TV interviewed Zhejiang textile enterprises in Xiaoshan, and found that 2/3 textile enterprises in the region were in the process of shutting down production.

A female boss who is still producing clothing material said: "we are barely keeping with the small profits, and the orders for export are afraid to pick up.

More businesses simply stop production.

The bustling business of China's textile industry has been so rapid and brutal when it passed away, and many small businesses failed to struggle long enough to quit the industry quietly.

Experts say that the textile industry has suffered "the most difficult year in the past ten years" because the industry hollowing up has not been changed, and it has been hit hard by the harsh market environment at home and abroad. The reduction of the export tax rebate rate has made the textile enterprises' meager profit margins further compressed, almost becoming the last straw to crush camels.

It is in this situation that the export tax rebate rate reduction policy not only failed to achieve the expected revenue, but faced the pressure of appealed to the callback.

Before the export tax rebate rate was cut in 2006, the export tax rebate rate of the textile industry was 13%, when the general profit of the textile industry remained at around 5%.

After the tax rebate rate was adjusted to 11%, the average profit of the textile industry also shrank to 3%.

According to the China Textile Industry Association's follow up survey, in 2007, there was a loss in every six domestic textile enterprises.

Du Yuzhou, President of the China Textile Industry Association, believes that the profit margin of the textile industry after 2/3 is only 0.74%, "this industry is ruthlessly eliminating the weak."

The textile industry has no way to deal with the subprime mortgage crisis that began in 2007.

Not only the US economic growth rate has slowed down, but also the global economic growth expectations for 2008 have been lowered, and the consumption market of international textiles has been severely weakened.

In theory, if the US economic growth decreases by 1 percentage points, the corresponding imports will be reduced by 1.65 percentage points. Therefore, the decline in US consumption will directly lead to a decline in demand for imports. Correspondingly, the increase in barriers to trade protection in the US will weaken the international competitiveness of China's textile exporters, and at the same time, the EU and Japan's demand for commodity imports will also be reduced by the US economy.

In particular, the last point has greatly affected the export of China's textile industry.

In the first quarter of this year, the number of Chinese textiles and clothing imported by the United States dropped by 1.68% and 7.74% compared with the same period last year, according to the OTEXA.

The first textile editor, Wang Qian, speculated that the proportion of textile and garment exports this year will continue to decline.

Looking back at the Sino US textile trade frictions in 2005, a large number of China's export oriented textile and garment enterprises have fallen into a desperate situation.

Since then, China's export tax rebate rate adjustment policy has continued to tighten, and the hegemony of the global economy has suffered an economic recession. After two years, the US economy once again has an indirect impact on the survival and pformation of Chinese textile enterprises.

At present, a large number of textile and garment enterprises in Guangdong are shutting down or semi shutting down. Precisely because of their major export markets, orders in Europe and the United States have shrunk dramatically.

With the US subprime mortgage crisis and the continued depreciation of the US dollar, the global inflation level has been rising. These factors are important drivers of the overall rise in the prices of production factors such as international raw materials, energy and power.

In the upstream industries of the textile and garment industry, cotton, crude oil and steel prices have surged again and again, resulting in an increase in the cost of raw materials such as spinning and chemical fiber.

Wang Chongshu, general manager of Henan Nanyang snow cotton spinning group, has said that the increase in oil prices will increase pportation costs, and steel prices will push up the cost of machinery and ingredients. "The price of steel will increase, and I will increase the cost of a machine by several hundred yuan."

All these make the profits of textile enterprises decrease gradually.

At the same time, the food crisis facing the world is pulling all related commodity prices up.

In addition, the price of imported raw materials is soaring relative to the small profits of exports.

Due to the restriction of land and oil resources, China's textile industry has great dependence on the import of raw materials in the international market.

According to statistics from the General Administration of customs, 4 million 370 thousand and 400 tons of textile raw materials were imported in 2007, of which 2 million 460 thousand and 400 tons of imported cotton accounted for 56.29% of total imports.

The "tariff upside down" between imported raw materials and export textiles has also led to some textile enterprises losing profits and losses.

While the US dollar is weakening, the renminbi is rising.

Textile, clothing, footwear and hat manufacturing industry is a large household of China's exports. China's textile industry has been relying on export as a whole for more than 50%.

According to the relevant data, textiles and clothing accounted for 38% of total exports and 62% of clothing exports.

The appreciation of RMB has squeezed the profit margins of foreign trade enterprises to a certain extent.

In particular, the textile and garment export enterprises settled in the US dollar with the US dollar settlement and the US dollar have evolved from the contributors of the state's foreign exchange reserves to the weary runners in the appreciation race.

In Xiaoshan, Zhejiang, the woman boss who is still producing clothing material, for example, said that a $1 million order would require delivery in one month. If the contract was signed in early May, the value of the RMB against the US dollar would be 7, and it would rise to 6.94 at the end of 5, which means that only because of the appreciation of the renminbi, the order would allow the company to reduce the profit of 60 thousand yuan.

"We are small businesses, and now we can only abandon long-term orders, take some short-term jobs, and compete for profits with time."

Under the enormous pressure of RMB appreciation, the marked price competitiveness in the international market has dropped sharply.

With the rise of the RMB exchange rate against the US dollar and the decline in the profit margin of the export products, unless the dollar is negotiated and settled, the small and medium-sized textile enterprises will have to raise their prices or sell their products to the domestic market and compete in the domestic market if they want to survive.

However, enterprises with strong bargaining power and space to raise prices are originally relatively high-end textile and garment enterprises, and SMEs are very difficult to bear the cost pressure.

Many overseas customers have become accustomed to the "made in China" price, which has led to the loss of quite a few customers.