In a bid to reduce trade frictions with Washington, China has agreed to scrap some export subsidies on a range of product categories, including textiles.
China will end its programme, called “demonstration bases-common service platform”, that provided export subsidies to seven economic sectors of Cina, including textiles, agriculture and advanced materials and metals. Last year, suppliers of subsidized services to Chinese exporters received more than US$1 billion from their government over three years, according to US trade office estimates.
In this regard, industry executives were sceptical about the deal and its impact, owing to the remaining disputes over other supports that China gives to its exporting industries, which include relatively cheap and easy credit from state banks, state-regulated power prices that have often favoured industry, and low prices for other inputs such as water.
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According to White House Spokesman Josh Earnest “The victory that the United States secured will help level the playing field for everyone from medical device makers in California, to textile workers in North Carolina, to those in the shrimp industry along the Gulf Coast.”
International Monetary Fund Director Christine Lagarde, who is in Washington for meetings of the IMF and World Bank, said the lifting of the export subsidies was a positive sign that Chinese leaders appear committed to pursuing economic reforms.
According to James Lewis, a Senior Fellow at the Center for Strategic and International Studies, “The Chinese want to become a high-tech country. They want to move up the value chain.” Hence, dropping of the subsidies is an effort by China to move away from labour-intensive production and emphasise more on sophisticated industries.