Textile exports are set to languish this year with no signs of a quick pick up, notwithstanding the increase in tax rebates.

China on Wednesday raised the tax rebate rates on exports of certain textile and apparel products from 15 percent to 16 percent. It is the fourth time the government has raised the rebate rate since last August.

However, the new policy is likely to have limited effect on exports, experts said, as demand from foreign countries decreased since last year.

Longyang Textile in Changshu, Jiangsu province, saw its orders from the European and US markets, which used to contribute about 40 percent of the company's business, decline this year, according to General Manager Pan Chunhua.

"The two markets now account for just 20 percent of our sales," she said. "So the increased tax rebate only has a limited effect on our exports due to weakening orders."

Zhang Xi'an, secretary general with China Chamber of Commerce for Import and Export of Textiles, said the country's textile exports are due to decrease in the first half of this year.

"The key obstacle facing exporters is the weakening orders," he said. China's textile and garment exports dropped to US$6.68 billion in February, a decrease of 35.1 percent compared with last year, according to the General Administration of Customs.

Exports to some major markets are also predicted to slow down.

"China's textile and apparel trade this year will probably see one of the lowest growth rates in a decade. The gloomy prospect of the US economy sinking deeper into recession is the main cause for the import demand shrinkage," said Sheng Lu, independent analyst.

He cited the figures from the 104th Canton Fair last autumn saying textile and apparel export contracts from US customers dropped by almost 30 percent compared to the previous year, suggesting a pessimistic outlook for 2009. In a bid to survive the recession, many textile exporters are striving to diversify their markets or adjust products to satisfy buyers.

Pan from Longyang Textile said her company had decided to turn to the home market

"Now what we can do is to participate in more relevant exhibitions and visit more buyers," she said.

Guo Min, product manager of the Shanghai-based Texhong (China) Investment Co Ltd said his company would pour more money into research and development to retain its market share.

"Direct exports account for only 20 percent of our business, while indirect exports account for 70 percent. But we are also facing pressure from indirect exports," he said.

(China Daily April 3, 2009)