Exporters are under the gun
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A senior manager of a private textile company in Jiangsu Province Tuesday said that the company is suffering from rising material and labor costs, and the only thing keeping them afloat is the government's export tax rebate.
Ding Guiqin, business manager with Suzhou-based Derui Textile Co, told the Global Times that cotton yarn prices have increased by 25 percent from October last year, and blue-collar salaries have increased to 3,000 yuan ($460.69) from 2,000 yuan last year for more skilled workers.
"We have no competitive edge compared with products from India, while costs continue to soar," said Ding, adding that their profit margin is less than 20 percent – including the 15 percent export tax rebate.
Ding's company exports products to Japan, Europe and the United States, and her firm exemplifies the findings of a recent survey done in six provinces including Guangdong, Zhejiang, Jiangsu, Liaoning, Sichuan and Hubei.
The survey found that thousands of small- and medium-sized trading companies are facing serious challenges, with half of them seeing profits decline. Others, meanwhile, are said to be suffering huge losses or already shuttered their doors.
"The rising raw materials, labor and financing costs, as well as renminbi appreciation have pushed the cost of exports up by 10 to 20 percentage points," said the survey as quoted by the Economic Information newspaper Tuesday.
On Tuesday, Yuan Xiaoming, a division chief from the Ministry of Commerce's (MOFCOM) finance department, said that the average profit margin in domestic export enterprises was 1.47 percent in 2010, lower than the average for industrial enterprises. Export profit margins declined even further to 1.44 percent in the January-February period this year.
In a foreign trade report released by MOFCOM last Friday, it was noted that first quarter costs are escalating, with oil prices up 17.8 percent, steel up 17.6 percent, and non-ferrous metals and chemical products 10.3 percent and 8.8 percent more expensive respectively.
"Rising costs ... are putting more pressure on corporate operations," the report said. To relieve this pressure, the survey suggests the current export rebate policy be maintained.
Huo Jianguo, director of the Chinese Academy of International Trade and Economic Cooperation – a think tank under MOFCOM – told the Global Times Tuesday that there is no reason to believe rumors about the possible cut of the export tax rebate.
