CHINA might need to resume tax incentives for textile exporters after the yuan’s appreciation crimped profits and curbed production, an official with the top economic planning agency said.

“Many of those companies are on the verge of shutting down,” Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, said at a trade conference in Beijing Saturday. “We should consider resuming some tax incentives to help them survive.”

Premier Wen Jiabao wants to narrow a record trade surplus that is flooding the economy with cash and adding to the world’s largest foreign-exchange reserves. The government last year reduced rebates on exports including textile, toys and steel products as part of an effort to lower energy consumption and ease trade discord with the United States and Europe.

The strengthening yuan and weaker demand in the United States, Europe and Japan, China’s largest trade partners, curbed export growth of toys, textiles, shoes and garments in the first quarter, Zhang said. China would not further cut rebates in sectors that create a lot of employment, he said.

“Some exporters are idling half or even all of their production this year because they couldn’t sign contracts while they are uncertain about how fast the yuan will rise,” Zhang said. “We should continue to support labor-intensive manufacturing to help boost jobs and farmers’ income.”

The yuan, also called the Renminbi, has strengthened 4 percent against the U.S. dollar so far this year, after gaining 7 percent in 2007.

About 90 percent of Chinese exporters were paid in dollars, and a lack of hedging tools left them vulnerable to currency losses, Fu Ziying, vice minister of commerce, said at the same conference.

“As global demand shrinks further, the room is diminishing for exporters to raise prices in order to ease pressure from the yuan’s appreciation,” Fu said.

China aimed to maintain 15 percent growth in the total value of exports and imports in 2008, Zhang said.

The government should take measures to “stabilize” investor expectations for the yuan’s appreciation, Zhang added, without elaborating.

(SD-Agencies)

CHINA might need to resume tax incentives for textile exporters after the yuan’s appreciation crimped profits and curbed production, an official with the top economic planning agency said.

“Many of those companies are on the verge of shutting down,” Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, said at a trade conference in Beijing Saturday. “We should consider resuming some tax incentives to help them survive.”

Premier Wen Jiabao wants to narrow a record trade surplus that is flooding the economy with cash and adding to the world’s largest foreign-exchange reserves. The government last year reduced rebates on exports including textile, toys and steel products as part of an effort to lower energy consumption and ease trade discord with the United States and Europe.

The strengthening yuan and weaker demand in the United States, Europe and Japan, China’s largest trade partners, curbed export growth of toys, textiles, shoes and garments in the first quarter, Zhang said. China would not further cut rebates in sectors that create a lot of employment, he said.

“Some exporters are idling half or even all of their production this year because they couldn’t sign contracts while they are uncertain about how fast the yuan will rise,” Zhang said. “We should continue to support labor-intensive manufacturing to help boost jobs and farmers’ income.”

The yuan, also called the Renminbi, has strengthened 4 percent against the U.S. dollar so far this year, after gaining 7 percent in 2007.

About 90 percent of Chinese exporters were paid in dollars, and a lack of hedging tools left them vulnerable to currency losses, Fu Ziying, vice minister of commerce, said at the same conference.

“As global demand shrinks further, the room is diminishing for exporters to raise prices in order to ease pressure from the yuan’s appreciation,” Fu said.

China aimed to maintain 15 percent growth in the total value of exports and imports in 2008, Zhang said.

The government should take measures to “stabilize” investor expectations for the yuan’s appreciation, Zhang added, without elaborating.

(SD-Agencies)