May 27, 2009

Chinese exports to get more govt. help

China's Cabinet announced new policy initiatives to boost exports, which are seen as declining because of the global financial crisis.

The State Council's new policy will include expanded credit insurance, tax breaks and more financial access, Xinhua reported.

The council also said China will keep its currency, the yuan, basically stable at a reasonable and balanced level so exporters won't be affected by exchange rate risks.

A higher yuan will make Chinese goods more expensive, thereby hurting exports.

China has been running huge trade surpluses, which some critics blame on the yuan being kept artificially low against other major currencies. The government in recent months, however, has taken steps to correct some of the imbalance.

The new initiatives include $84 billion worth of short-term export credit insurance to trading companies, the state-run news agency reported, adding the preferential policies will largely go to labor-intensive and high-tech industries.

Additional financing guarantees from financial institutions will go to smaller companies.

The council said shrinking foreign demand for Chinese goods will remain the biggest difficulty facing the economy. Members also called for expanding domestic demand to offset some of the export decline.

China's April trade surplus totaled $13.14 billion, but both exports and imports declined for the sixth straight month, blamed on weakening global economic outlook, depreciation of major Asian currencies and resurgence of protectionism.

China's trade surplus in the first four months of this year totaled $75.43 billion.