China to increase financial support for exporters, firms

Written by Dominique Patton, Business Daily [Kenya]

March 9, 2009: China will increase financial support for exporters and companies investing overseas in a bid to minimise the impact of the global downturn on its economy, Prime Minister Wen Jiabao said.

The country is facing its toughest economic prospects in years, said Wen in an annual address to parliament.

“This (economic slow-down) has resulted in excess production capacity in some industries, caused some enterprises to experience operating difficulties and exerted severe pressure on employment,” he said.

An estimated 20 million workers in China’s factories have lost their jobs as thousands of factories have shut down in response to weak demand for consumer goods in the West. GDP growth fell to 9 per cent last year, down from 13 per cent in 2007, and many analysts expect it to fall further in 2009.

But Wen said China can still meet a growth target of around 8 per cent, provided it pursues the right policies. Those include boosting domestic demand and also helping companies to export or invest overseas. “While stressing the importance of boosting domestic demand, we must not slacken efforts to promote exports,” said Wen.

The government already offers tax rebates on a range of export goods such as textiles and some machinery and commonly alters the rate in response to trading conditions. The tax rebate on textiles has been increased three times in the last six months.

Wen said the government will also encourage banks to develop export financing to help companies selling goods overseas. SMEs will get help to expand international markets and there will be a focus on “cultivating brand-name exports”.

China, now the world’s third largest economy, sold goods worth Sh29.7 billion to Kenya in 2006, the latest date for which such data is available, almost 20 times the amount it imported from Kenya.

But despite fears of rising protectionism among its trade partners, the country is keen to help exporters as a means of ensuring rising incomes and social stability at home.

“In the face of the serious situation of a sharp decline in external demand and growing international trade protectionism, we will increase our support for import and export, straighten out and adjust foreign trade policies and improve conditions for trade,” said Wen.

The government also wants to boost financial support for companies investing overseas. Wen said it would encourage large companies to play a leading role in the country’s ‘go global’ strategy.

Many of those large companies building roads and dams in Africa have come under criticism for their working practices but Wen said “we will strengthen risk control and supervision of enterprises’ overseas investments”.