Beijing extends aid to export sector
Cary Huang in Beijing
Beijing has rolled out more support for the embattled export sector, which it described as being 'the biggest difficulty' facing the country's economy.
After a cabinet meeting yesterday, the State Council pledged to expand its policy-supporting measures, some of which have been in place since last year, covering export credit insurance, preferential taxes and access to financing, to help exporters weather the global downturn.
The decline in exports was the biggest challenge and would continue to be 'the biggest difficulty' facing the economy, said a statement issued after the meeting presided over by Premier Wen Jiabao.
'[We will try] a thousand ways and a hundred plans to stabilise external demand, and to minimise the impact of the global financial crisis on our foreign trade,' it said.
The central government had announced a raft of policy measures to help exporters, such as raising export rebates on products including textiles several times, after exports began to collapse in the second half of last year.
The new measures include a central government fund of US$84 billion for export credit insurance; further raising of tax rebates for exports, especially for labour-intensive and high-technology products; financing access to exporters; reducing government tariffs; simplifying customs procedures and encouraging outbound investment by enterprises.
The government is also offering US$10 billion of credit to overseas buyers of mainland products this year.
Exports dropped 22.6 per cent last month from April last year, following falls of 17.1 per cent in March and 25.7 per cent in February, marking their sixth consecutive monthly decline.
There have been signs of improvement recently as many Hong Kong producers in the Pearl River Delta said they had secured more orders this month.
But the country's leaders fear the widespread closures of labour-intensive manufacturing, such as textiles, toys and electric appliances, could trigger social instability. The closures, mostly in the Pearl River Delta, have sent as many as 30 million migrant workers home.
In a meeting with major exporters in Jiangsu province on Monday, Vice-Premier Wang Qishan said the government would spare no effort to maintain the country's share of global export markets.
'To stabilise the external demand is key to maintaining economic growth, securing employment and protecting people's livelihoods,' Mr Wang said, according to a statement posted on the central government's website yesterday.
The latest official data for last month gave a mixed picture and triggered a debate among economists on whether rising capital investment and retail sales and improving industrial production could offset the contracting export sector.
Some said the weaker than expected export figures had cast doubts over whether a recovery driven by government-led infrastructure spending was sustainable in the longer term.
Qu Hongbin, the chief China economist with HSBC, said there was increasing evidence that the country's growth was on track to recover to more than 8 per cent in the second half of the year. 'With global demand for exports likely remaining weak, domestic final demand, especially investment, will lead the recovery.'
In yesterday's statement, the government also said the country would keep the yuan 'basically stable ... at a reasonable and balanced level' to support exporters.