China took decisive action to ease rising concern from trading partners by hiking textile tariffs on more than 70 products by 400 percent.

The rise on 74 Chinese-made textile products will come into force from June 1, China's Ministry of Finance announced on Friday.

The rise sent panic through the country's textile and garment industry. Some have predicted factory closures and job losses.

The Ministry of Finance said in a statement on its website tariffs would rise from 0.2 yuan (2.4 US cents) to 1 yuan (12 US cents) per unit. The largest tariff increase would be from 0.3 yuan (3.6 US cents) to 4 yuan (48 US cents) per unit. And a new tariff of 3 yuan (36 US cents) per kilogram will be imposed on exports of flax yarn.

According to spokesperson for the Ministry of Commerce Chong Quan, the decision is aimed to further promote the upgrading of the Chinese textile industry and safeguard the rights of enterprises that deserve to benefit from the integration of the textile trade.

"It shows the Chinese government's priority is to ensure steady growth of the international textile trade," Chong said.

"We had hoped that the increase margin would be smaller and a two or three-month period would be left for the companies to digest such hikes," a textile industry insider told China Daily yesterday.

The source said the measures would impose a great threat to textile and garment producers, particularly some small-sized factories.

Shell-shocked manufacturers

Some Chinese textile manufacturers said they were shell-shocked after the announcement and claimed the rise will drastically slash their profit margin.

"Our profit will be squeezed as we currently only earn 1 yuan (12 US cents) to 2 yuan (24 US cents) from each shirt," said Guo Jiahong, an official of Yangzhou Shuaimeisi Garments Ltd.

He said he was worried the government's decision might make it more difficult for the company to honor current four-month orders.

Guo said earlier protective measures initiated by the United States had practically shut the door to the US market for his company which produces cotton shirts.

Some entrepreneurs predicted that a number of textile manufactures would go bankrupt by August or September.

Sun Huaibin, spokesman for the China Textile Industry Council, was quoted by the Xinhua News Agency as saying his council understood the decision .

He said China, as a responsible country, made the concession in a bid to establish a stable trade order and ease current trade frictions. However, he said, Chinese companies would have to make sacrifices.

The hike was welcomed by China's trade partners. "We are encouraged by this move," said Charlie Martin, president of the American Chamber of Commerce in China.

He said this voluntary step by Beijing demonstrated China was adopting a constructive approach and was sensitive to the hardships which the removal of quotas has brought for some American workers.

The Ministry of Commerce on Friday also called for observation of free trade principles and rules of the World Trade Organization.

100,000 job losses

The US Department of Commerce and the European Union launched an investigation into certain categories of textile products to consider whether to re-impose quotas on these commodities last month.

The US government announced initiated safeguard measures against three categories of textile products earlier this month; similar measures were imposed on another four categories last Thursday.

As a result, analysts predicted, about 100,000 Chinese workers in this sector might lose their jobs.

(China Daily May 21, 2005)