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Textile industry calls for no more tax rebate cut

By Tu Lei (chinadaily.com.cn)
Updated: 2008-05-12 17:18

"The textile tax rebate will not be lowered," said Du yuzhou, president of the China National Textile and Apparel Council, at a national textile meeting on May 9, according to today's Securities Times.

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Du made this remark at a time when the mood in the textile business is decidedly gloomy, with many of the players in the industry saying this is going to be the toughest year ever.

In the first two months of this year, one third of companies saw an average profit margin of 8.73 percent, while the rest were reduced to a loss of 1.685 billion yuan ($241.14 million) from a 1.641 billion yuan profit in 2007, with 11,072 companies in red.

"Some 23.7 percent of textile companies are operating in loss, compared with last year's 14.34 percent," said Du at the meeting.

Shandong, the third largest cotton producing province in East China, saw 433 companies with a profit margin of over three percent, accounting for 29.6 percent, while 21.3 percent of firms lost money or even went out of business.

Analysts from the Shandong Economics and Trade Committee said the restrictions on materials, electricity, and transportation abilities will continue to hinder local textile industry's development.

In the first quarter of this year, the price of materials was up 3.2 percent, and that of fuels up 17.7 percent. Experts predict the human resource cost will increase by 20 percent in 2008.

To reduce the soaring trade surplus and curb energy-intensive industries, China reduced the tax rebate on textile products and garments to 11 percent from 17 percent in 2004.

And since the second quarter of 2005, the yuan has appreciated 15.8 percent, dragging down the earnings of exports.