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UPDATE 1-China ramps up support for foundering exporters
May 15, 2014 / 5:06 AM / 3 years ago

UPDATE 1-China ramps up support for foundering exporters

* China to quicken speed of tax rebates for exporters

* Aims to increase financing channels for trade industry

* Banks encouraged to develop more FX hedging products for sector (Adds details)

BEIJING, May 15 (Reuters) - China is increasing its support for its wobbly trade sector with a raft of new measures that include giving more tax breaks, credit insurance and currency hedging options to its exporters.

In a statement titled “stabilising trade growth”, the government said China needs to ensure its trade sector grows at a stable rate while developing its services trade industry.

The support measures, which ranged from increasing financing channels for the trade industry to a reiteration of plans to keep the yuan stable, underscore the importance of a sector that plays a key -- albeit diminishing -- role in China’s economy.

To help exporters, the government said on its website that the size of tax rebates would also be raised for poorer regions, and that the scale and coverage of export credit insurance would also be increased.

Banks would be encouraged to expand their services for the trade sector, which include developing more currency hedging products that can be sold to companies to help contain their foreign exchange risks.

To that end, the government repeated that it would let market forces have more sway over the yuan’s value while increasing the currency’s flexibility -- both of which would allow China to keep the yuan “basically stable” at a reasonable level.

The yuan is a perennial lighting rod issue between China and its trade partners, which has in the past accused Beijing of deliberately holding down the currency to lift Chinese export sales. China has always denied these accusations.

U.S. Treasury Secretary Jack Lew, who was in Beijing this week, honed in on the yuan’s 3 percent decline this year by urging China to be more transparent in its currency policy and let market forces have more influence over the yuan’s value.

Hurt by unsteady foreign demand and a rising yuan, China’s monthly average export growth last year was about a quarter of the 35 percent seen a decade ago. As a result, the sector was a drag on the world’s second-largest economy in 2013, with net exports detracting 4.4 percent from overall growth.

But despite the falling contribution to growth, China’s trade sector remains a labour-intensive industry and a key employer -- an important detail for the government which says job creation is its first policy priority this year.

The latest document from the Chinese cabinet was originally drafted on May 4 but only made public on Thursday. (Reporting by China Economics Team; Editing by Jacqueline Wong)

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