Textile exports hit by rebate cut
Source: By Yin Ping (China Daily) Date: 2006-09-18
Textile companies in the Yangtze River Delta, where many of the country's textile firms are clustered, are reacting differently to the confirmation of the long-rumored tax rebate cut.
The new policy, lowering the tax rebate for textile exports from 13 per cent to 11 per cent, came into effect on Friday.
Song Yan, senior manager of the Violet Home Textile Co Ltd in Jiangsu Province, responded calmly to the tax rebate drop.
"The policy does not affect us very seriously," she told China Daily in a telephone interview. "Our piece value is relatively high."
Violet Home Textile produces mainly medium and high-level bedwear sold at department stores in the United States, Canada, Europe and the Middle East, with annual sales of US$10 million.
Song predicted that her company would lose at least US$100,000 for orders already placed but not yet delivered.
"We will take the reduced tax rebate into account when pricing future orders," Song said, adding she will put a premium on her products by coming up with new designs and colours.
In contrast with Song, Liang Qun, senior manager of China Artex Taizhou Import & Export Co Ltd in Zhejiang Province, was more agitated.
"The tax rebate cut will cause more textile companies to go bankrupt," Liang said.
His company produces shoes, fabrics and garments as well as metal tools, with annual sales of US$10 million.
"We will lose about US$15,000 for shoes and fabrics," Liang said. Net profit for one pair of shoes is only 1 yuan (12.5 US cents) in his company. "Our profit margin is already razor-thin," he said.
The reduction of the tax rebate cut has delivered another blow to the shoe manufacturing industry, which had already been battered the rising price of raw materials, a higher tax rate and an improvement in workers' compensation.
"My guess is next year one-fifth of the textile companies in Wenling will close," he said.
Wenling, a county of Taizhou, is where Liang's company is located. It is known for numerous shoe-making family workshops.
Once these family workshops are closed, the people will have to go to big cities as migrant workers or shift to other forms of business, neither of which is a good choice, Liang said.
"One of my friends quit the textile industry last year, and has not yet found a job," he said.
According to an online poll by Webtextiles, China's first textile portal, more than 65 per cent of the 2,200 polled said the tax rebate drop will have a noticeable impact on their companies, while only 17 per cent said the impact will be modest.
Over 75 per cent of the polled disapproved of the 2 percentage points reduction.
