CHINA: China Ministry Urges Slower Yuan Rise to Help Textile Firms

China should slow the pace of yuan appreciation and increase export tax rebates to help a struggling domestic textile industry. The government should take measures to appropriately slow the yuan appreciation pace. The government should also increase the export tax rebate rate on textile products back to 13 pct from the current 11 pct and the rebate rate for clothing back to 15 pct from the current 11 pct. Also exempting textile machinery from import taxes and providing more financial support to help textile companies solve their cash flows difficulties.

The central bank is known to favor faster yuan appreciation to help combat domestic inflation while other government agencies, including the NDRC and Commerce Ministry usually oppose a rapid rise in the yuan, arguing this hurts vital export industries. The central bank said in its latest research report that the recent slowdown in export growth should not be exaggerated as this would actually help to improve the overall structure of exports.

However, the Customs Administration released a report Wednesday warning that this year's trade surplus could fall below that in 2007, in part due to the yuan's appreciation, suggesting that net exports could actually subtract from growth this year.

Source: Thomson Financial News