China Increases Tax Rebates on Textiles to 13%

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Aug. 1 – China increased the tax rebate on textiles and garments from 11 percent to 13 percent today.

The tax relief will help textile exporters who have been hurt by slumping demand, higher costs, and the RMB rising value

This increased tax rebate is expected to boost exports, most significantly for silk, chemical fiber, wool yarn, and cotton products, China Daily reported.

The government has also abandoned export rebates for certain products such as pesticides, paint, battery, and medicine. Furthermore, efforts have also begun to upgrade the country’s industries while reducing more energy-intensive and highly polluting sectors. For example, tax rebates have been cut already on a number of types of silver. The latest announcement has scrapped zinc’s five percent tax rebate.

In order to keep expanding export growth in check last year, China had lowered the rebate rates of value-added tax for over 2,800 products, a move which greatly impacted the textile and clothing industry.

Thin profit margins for textiles—the average is now at only three percent—have put several exporters in danger of bankruptcy and created the pressure on Beijing to act.

In the first six months of this year, the country’s textile and clothing exports totaled US$81.7 billion, up 11.1 percent. The growth rate however was 6.4 percent less than last year’s over the same period of time.

June’s exports were especially indicative of the slowing industry. Textile and garment exports fell by 4.2 percent year-on-year, demonstrating the smallest increase in five years.

Please contact editor@china-briefing.com for a list (in Chinese) of the textile products affected by the increase in VAT refunds and a list (in Chinese) of the products that have had their refunds canceled.