Commerce ministry expected to back measures to help exporters
The Ministry of Commerce is expected to propose to state leaders that they slow the pace of the yuan's appreciation and reinstate value-added tax rebates on selected exports as temporary measures to assist struggling exporters and shore up trade, according to industry sources.
The sources said the ministry aimed to finalise a proposal this week that would address the problems faced by tens of thousands of Guangdong-based Hong Kong exporters, including recommendations from major industry bodies.
The proposal is expected to suggest that Beijing adjust macroeconomic measures in the second half of this year, after the country ended the first half with a sharp decline in exports, a record high yuan and punishing increases in the costs of raw materials, labour and fuel amid an unfolding global economic slowdown.
As part of a fact-finding mission, Wang Hui, the head of the Ministry of Commerce's Hong Kong office, last Friday held a rare high-level meeting with representatives of 16 industry associations, including textile and garment, shoe, toy, watch, home appliance and chemical makers.
'We have told Mr Wang about our challenges and recommendations,' said Stanley Lau Chin-ho, deputy chairman of the Federation of Hong Kong Industries, which arranged the meeting. 'He is deeply concerned about the problems the industries are facing and promised to relay the information to Beijing.'
Premier Wen Jiabao and his top aides visited five export-led regions - Guangdong, Jiangsu, Shanghai, Shandong and Zhejiang - to inspect the severity of the state's economic problems ahead of fine-tuning macroeconomic policies for the remainder of the year.
Toys Manufacturers' Association of Hong Kong executive vice-president Lawrence Chan, who attended the meeting, said the new labour contract law, the growing strength of the yuan and lower VAT rebates had taken a severe toll on the toy industry,
'The biggest gifts to us would be a much slower pace of yuan appreciation and a clearer set of implementation guidelines for the new labour legislation,' Mr Chan said.
It is estimated that 20,000 out of 65,000 Hong Kong-owned plants involved in processing exports could shut down by the end of this year.
Mainland exports increased at a lower than expected 17.6 per cent last month, ending the first six months of the year with growth of 21.9 per cent to US$666.6 billion from a year earlier and leaving the first-half's trade surplus 11.9 per cent lower at US$99 billion.
Merrill Lynch economist Lu Ting predicted some mild policy changes such as reinstating VAT rebates for labour-intensive exports such as textiles and garments.
'This is only a fine-tuning of policies; we should not expect a sweeping change in policy stance,' Mr Lu said.
The yuan broke yet another record of 6.82 to the US dollar yesterday. However, many economists said pressure on yuan appreciation would ease given a smaller trade surplus and lower growth in exports and inflation.
Proposal is expected to address problems facing Hong Kong exporters
Last month, mainland exports grew at a lower than expected: 17.6%