Textile tax rebates rise to boost manufacturers

China’s tax authorities have increased value-added tax rebates for textile and garment exports in a bid to bail out struggling manufacturers, the South China Morning Post reported. The rebate has been raised by 2 percentage points on average to 13%. Exporters usually pay 17% in VAT. Rising costs and currency appreciation are squeezing manufacturers’ profit margins. Although some exporters have dismissed this latest measure as little more than a token gesture, there are expectations that increased rebates will be extended to other industries such as toys and shoes. The purchasing managers’ index, which is used to gauge manufacturing activity, contracted last month for the first time since surveys began in 2005. The index fell to 48.4 in July from 52 in June (a reading above 50 reflects an expansion, below 50 a contraction). China’s output and export orders indices also shrank in July.