Factory floor of a textile manufacturer in Haian, East China's Jiangsu province.?[China Daily]

China is set to raise export tax rebates on textile products to 17 percent after the government unveiled six measures to shore up flagging exports on Wednesday, analysts said.

Although the move hasn't been officially announced, there has been much speculation among industry insiders and experts that higher tax rebates are on the way.

The 21st Century Business Herald newspaper reported that the proposal to increase tax rebates had been agreed to at the State Council's latest executive meeting.

"If it is true, the tax rebates would be lifted to an all-time high, which demonstrates the government's determination to take forceful measures to support the industry," said Ou Zhihang, an analyst with Pingan Securities Research.

The government also decided at Wednesday's meeting to scrap a number of charges on the textile sector and give more credit support to textile exporters' technological upgrading.

From January to October, China's textile and garment exports reached US$153.71 billion, up 8.6 percent year-on-year, according to Customs figures.

China has raised export tax rebates three times this year, pushing the rebate level up from 11 to 14 percent. However, analysts worry that the stimulus efforts may not be enough to prevent textile exports from sliding further.

"The toughest time for textile exporters has yet to come. As the global financial crisis unfolds, China's textile exports may not maintain their previous vigorous growth momentum for a long time," said Li Wei, an economist with the Standard Chartered Bank.

"With the economies of China's biggest export destinations - the US, Europe and Japan - falling into technical recession, China's export sector is doomed to take a beating from worsening overseas demand," Ou said.

At the recently concluded China Import and Export Fair, orders received by textile and clothing exhibitors dropped more than 30 percent, according to Qu. He warned this indicates a big contraction in China's export growth next year.

The weakening domestic demand may also cast a shadow over the industry, with textile product retail sales growth slowing to 20.3 percent in October, down from the 32.6 percent a year ago.

(China Daily November 21, 2008)