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A proposal to increase export tax rebate rates for the Chinese textile and garment sectors, floated June 6 by the Chinese Ministry of Industry and Information Technology, appears likely to be implemented, a source told Stratfor on June 12. The move would mark a reversal of a key tenet of the government’s economic reform program.
It is not clear whether the source’s information was based on a conversation with senior Chinese officials or simply on a fresh batch of rumors. However, regardless of its origins, Stratfor believes such a positive call to be well-founded. China’s textile sector is under severe stress, but Beijing cannot allow it to collapse without risking widespread social instability that could threaten the government’s hold on power.
Textiles are one of the most vital pillars of economic stability in China. The industry accounted for 57 percent of China’s $262 billion 2007 trade surplus, and it supports more than 20 million textile workers, 65 percent of whom are rural migrant workers.
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