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New beneficial policies for textile enterprises

(www.ecf.org.cn)        Updated: 2018-10-26

The middle- and small-sized textile enterprises are facing a changeable situation due to the Sino-US trade war. Therefore, they are more cautious about future development. Also, just this past September, as the weather became cooler, the active market because of the change of seasons ended. The inventory of some textile enterprises in September and October exceeds that in August and they starts curtailing or halting production.

However, looking ahead, the textile industry is expected to benefit from a series of supportive policies newly released by the national government.

1. China's central bank cuts reserve requirement ratio to unleash liquidity of more than 1 trillion yuan ($144.9 billion)

The People's Bank of China announced a reserve requirement ratio cut in Oct 7 to inject liquidity into the market. Some of the liquidity unleashed will be used to pay back around 450 billion yuan of the medium-term lending facility maturing on Oct 15, while the liquidity of another 750 billion yuan would be injected into the market. Some finance experts analyzed that the liquidity is to be invested into the real economy, rather than the real estate market and stock market.

The Ministry of Finance also brought good news after the central bank's reserve requirement ratio cut. Liu Kun, Minister of Finance, said that they are working on larger-scale tax reduction and fee cut measures, and predicted that the annual amount of tax reduction and fee cuts will exceed 1.3 trillion yuan.

This reserve requirement ratio cut helps alleviate the cash flow pressure of cotton enterprises, stabilize the cotton price, maintain the mid- and long-term development of the market, and stimulate the domestic consumption of cotton and garments, so as to recover the confidence of cotton enterprises.

2. Environmental protection policy to be loosened

At present, the new tariff that the United States has imposed on 200 billion dollars of goods imported from China has reached 10 percent, which increases the pressure on both manufacturing companies and the national economy.

To alleviate economic pressure, Beijing, Tianjin, Hebei, and their surrounding areas will set up a new goal of cutting the average density of PM 2.5 and the percentage of bad air quality days by 3 percent year on year from this October to next March to stimulate economic growth. This goal is much lower than last year's requirement of cutting at least 15 percent, which means the new goal targets specifically chemical enterprises that cause more serious pollution.

3. China will cut the most-favored-nation rate of duty on certain products as of Nov 1

China will reduce the tariff rates of 1,585 imported industrial products as of Nov 1 this year. The average tariff rate of some electromechanical equipment that is in great demand in domestic markets such as engineering machinery, instruments and apparatus will fall from 12.2 percent to 8.8 percent. That of textile products and building materials will fall from 11.5 percent to 8.4 percent, and that of primary products such as paper articles will decrease from 6.6 percent to 5.4 percent. And tariffs on similar products will also be cut. As a result, China's average rate of duty will fall from 9.8 percent last year to 7.5 percent, which means textile enterprises will spend less on buying imported weaving machines.

Meanwhile, the process of facilitating customs clearance will speed up. The number of documents that need to be examined for import and export will be cut from 86 to 48 as of Nov 1. The fees of containers for import and export will also see a sharp decrease this year.

With the implementation of these policies, it is predicted that the business environment for textile enterprises will be improved before the end of this year.