Measures to aid more industries expected
The central government is expected to unveil stimulus policies soon for the oil refining, chemical and textile sectors, mostly focusing on tax concessions and financing support.
The government will encourage oil refiners to upgrade their facilities to enable the production of cleaner fuels, raise tax rebates for textile exporters and provide these industries with more loans to shore up their finances in the face of the global credit crunch and declining demand.
The measures will follow support policies announced last week for the vehicle and steel sectors. Other sectors, such as shipbuilding and equipment manufacturing, are also expected to receive assistance.
Beijing planned to spend 100 billion yuan (HK$113.44 billion) in the next two years to upgrade refining facilities so that they could meet more stringent emission requirements on vehicles, China Business News reported.
But an industry official with knowledge of the drafting of the policies said the investment would not be made by the state.
'The government is not going to invest such a huge amount from the public coffers. Instead, it will provide subsidies to refineries or support for them to obtain bank loans,' said Sun Weishan, the director of industry planning at the China Petroleum and Chemical Industry Association.
The measures, being considered by the State Council this week, would not be announced this week, Mr Sun said.
A PetroChina source said the refinery upgrades would go ahead only if it made economic sense and would not be done purely to fulfil state environmental protection goals. A major factor would be the availability of cars that met the emission requirements.
The draft measures for the textile industry included an increase in rebates of value-added tax (VAT) on exports and encouraging banks to provide firms with more loans, an industry source said.
'I think lifting the VAT rebate for exports is the most direct way to help the textile industry,' said Wang Cunbo, the head of finance at Ningbo-based textile firm Shenzhou International Group.
Beijing already raised the rebate of VAT on textiles twice last year to 14 per cent to aid the ailing industry, which is suffering from yuan appreciation, high raw-materials and labour costs, tightened credit access and declining demand. VAT is levied at 17 per cent.
Customs figures show the mainland's textile and garment exports grew 8.2 per cent last year, but the growth rate was about 10.7 percentage points lower than in 2007.
The Ministry of Commerce said yesterday Beijing was highly concerned about the plight of the sector, as it directly employed more than 20 million people and an additional 100 million indirectly.
China Business News said Beijing would also support mainland companies investing in resources abroad, including oil and raw materials for potassium and phosphorous-based fertilisers.
Lydia Zhong, a senior manager of investor relations at fertiliser producer China BlueChemical, expects Beijing to introduce measures to support fertiliser exports, speed up project approvals and provide financing to help the industry.