China Raises Export Rebates for Textiles, Toys as Growth Slows

By Nipa Piboontanasawat and Nerys Avery

Oct. 21 (Bloomberg) -- China will raise export rebates on a range of products including textiles, toys and medicines next month to support the world's fourth-largest economy as the deepening global slowdown hurts demand for Chinese goods.

Tax rebates on some shipments of textiles, garments and toys will be increased to 14 percent and those on some plastics exports will be lifted to 9 percent, the Ministry of Finance said today on its Web site. The adjustment, which starts on Nov. 1, will apply to 3,486 items which account for a quarter of taxable exports, the statement said.

``The government is getting very worried about the risk of a sharp economic slowdown as the global recession started,'' said Kevin Lai, senior economist at Daiwa Institute of Research in Hong Kong. ``There will be more measures, including tax cuts, expansion of infrastructure spending and interest rate cuts.''

Today's announcement comes a day after official data showed China's economy grew 9 percent in the third quarter, the slowest pace in more than five years, as a looming global recession curbed demand for Chinese-made goods. Premier Wen Jiabao said on Oct. 19 the government would issue a series of measures to sustain growth in the face of the international financial and economic crisis.

The State Council, or cabinet, today approved construction of a series of infrastructure investment projects, including new expressways, airports, nuclear and hydro-electric power stations. No specific projects were mentioned in a statement posted on the government's Web site after the cabinet meeting.

The world's second-biggest goods exporter saw its trade surplus drop 3 percent to $180 billion in the first nine months as shipments to the U.S. and Europe cooled.

Toy Exports

``If these measures were not taken, there would be a further decline in exports which would have a negative impact on China's economic development,'' the Ministry of Finance said in its statement today.

Trade contributed 1.2 percentage points to China's 9.9 percent growth in the first nine months of the year, half the level in the same period of 2007, the statistics bureau said yesterday. China's export growth has averaged 22.2 percent this year, down from 27.2 percent last year, official data shows.

Half of the country's toy exporters went out of business in the first seven months of the year because of rising production costs and the increase in the value of the yuan, the customs bureau said last week. A quarter of Hong Kong-owned businesses in the Pearl River Delta manufacturing hub in southern Guangdong province may go bankrupt because of the global financial crisis, the Federation of Hong Kong Industries said yesterday.

Rebates on some furniture exports will be raised to 11 percent or 13 percent, the finance ministry said today. Drugs to treat AIDS and some other medicines and electrical goods such as sewing machines, electric fans and electronic parts for machine tools will also have their export rebates raised to between 9 and 13 percent, the statement said.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net