The ministry of finance said the rebate for toys would be raised from 11% to 14% as of November 1. That on clothing and textiles would rise from 13 to 14%. In all, 3,486 types of products - about one quarter of exports - will be covered.
Stephen Green, head of China research at Standard Chartered, told Bloomberg that export growth could tumble from 22% in the first nine months of this year to "zero or even negative growth" in 2009.
China's announcement on Monday that GDP growth had fallen to 9% - highly enviable to most countries, but the slowest rate in five years - sent a shiver through observers who hoped the country's rapid expansion would compensate for falling demand elsewhere.
The head of China's economic planning agency pledged that it could maintain its growth rate yesterday.
"Of course, due to the upturn of economic turbulence outside China there is some slowdown to our growth rate, but I think the growth of China's economy will still be at a 9% rate," Zhang Ping, chairman of the National Development and Reform Commission, told reporters in Australia.
He cited strong domestic demand, adding that only 1.2% of China's growth last year came from exports. But other economists predict that GDP growth could fall to 7% or 8% next year.
The tax changes will be welcome relief for exporters who have felt increasingly hard pressed by soaring production costs and the rapidly appreciating yuan as well as the bleak global economic outlook.
Speaking before the changes were announced, Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association, told Guangzhou Daily: "Of the 3,800-odd toy firms in Dongguan, no more than 2,000 are likely to survive the next couple of years."
Industry in Dongguan, a manufacturing city in south China's Pearl River Delta, includes 7,000 garment plants and 3,000 footwear factories. Mass manufacturers have been particularly badly hit because local authorities have been attempting to shift the region's economy towards higher-value goods and services.
Source : articlesbase
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