China is easing off on some of its low end manufacturers because of the global economic slowdown and worries about protectionism.
Reuters reports government officials as saying they will stop further cuts in value added tax refunds to help hard-pressed exporters. The VAT refunds have been scaled back to rein in labor intensive low-end manufactured exports, partly to mitigate the political pressure on the country because of its trade surpluses and partly to support the drive of manufacturing up the value chain.
The comments came at a weekend conference in Beijing for importers and exporters where there was a palpable concern about pressures on exporters. Footwear, toys and plastics manufacturers in southern China have been forced to close in recent months as a result of the policy, fast-rising labour costs and a strengthening yuan.
That is exacerbating a trend of pushing manufacturing out of high-coast coastal regions, though in China’s case it is not moving off-shore, but in-shore, to lower-cost inland provinces.