28 March 2009
China experienced a 15% fall in textile and apparel exports in the first two months of the year. Sales to the European Union strongly declined while shipments to the United States were also sharply down in February after a post-quota surge in January. In order to limit the drop in sales, Beijing will raise from 15% to 16% the export rebate rate for textile and clothing exports, effective from April 1st.
If January data had masked the reality, China's official statistics for February exports showed a dramatic plunge in sales to foreign countries.
The Chinese government immediately reacted by raising export rebate rates from 15% to 16% as of April, 1st.
As a result, Chinese exporters of textiles and apparel will only have paid 1% of the 17% VAT in the future, after being refunded 16%.
A rumor had announced a 2% increase to the maximum rate of 17%, therefore fully exempting exporters of the Valued Added Tax.
The government however kept this additional increase for the future, amid growing pessimism over the level of textile and clothing exports in 2009.
February data showed a 36% drop in US$ exports of textiles and apparel after they declined less than 1% in January.
The Lunar Year holidays this year fell at the end of January and this may explain the huge difference in January and February results.
Over the two-month period nevertheless, China's textile and clothing exports are still down 15.31%.
This is partly due to a very strong decrease in textile exports indicating a fall in apparel production in other Asian countries.
Shipments of textiles were down 20.5% in January-February, from the same period in 2008.
Exports to the European Union fell 18.5% while down 21% to the United States and 25% to Mexico.
Clothing exports were also negatively affected by the global economic crisis, losing 12% in the first two months of the year.
After a 5.7% rise in January, exports plunged 37.5% in February.
Knit apparel exports under HS chapter 61 were down 12% in January and February at US$6.63 billion.
Woven apparel shipments under chapter 62 fell 10.7% at US$7.16 billion.
If apparel exports to the United States surged 22% in January after quotas were lifted, they lost 36% in February, finally down 0.68% over the two-month period.
Exports to the European Union rose 9.4% in January before being nearly halved in February (-46%) and finally falling 10.57% over the two-month period.
Quotas were eliminated a year earlier at E.U. borders and the consecutive effect on Chinese exports is now disappearing.
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