China Export Growth May Cool on Global Economic Slump
The State Council, China’s cabinet, said the stimulus package will include low-rent housing, infrastructure in rural areas, roads, railways and airports. The government will also allow tax deductions for purchases of fixed assets such as machinery to stimulate investment.
To help exporters through the slowdown, the government raised tax rebates on 3,486 items, including toys and textiles, from Nov. 1. It has also stalled the yuan’s gains against the dollar and eliminated quotas that restricted lending by banks.
Export Orders
An export-order index compiled by CLSA Asia Pacific Markets dropped last month to the lowest since it began in 2004. The number of buyers from the U.S. at China’s largest trade fair, in the southern city of Guangzhou during October and November, fell 20 percent from a year earlier. Orders at the fair dropped 16 percent.
Export rebates for some labor-intensive industries may be increased again, the China Securities Journal reported on Nov. 6, citing an official from the Ministry of Industry and Information Technology.
“Policy changes can’t fight cyclical downturns and global demand is beyond the government’s control,” CICC’s Xing said.
The central bank has cut interest rates three times in two months, reducing the key one-year lending rate to 6.66 percent.
“Inflation remains a medium and long-term worry but it’s not the issue at the moment,” said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong.
Premier Wen Jiabao says sustaining growth is his government’s “top priority.”
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