In a move to safeguard thousands of jobs, China declared it will scrap - after only 10 days since its announcement - its sharply increased export duties on Chinese-made textiles.
The withdrawal comes after Washington and the European Union clamped more restrictions on Chinese exports, which China said are "unfair and incorrect."
Minister of Commerce Bo Xilai told a news briefing yesterday that export tariffs on 81 categories of textile products will be lifted from June 1, including the 74 for which 400 percent increases were announced on May 20. This is in a bid to ease the concerns of China's trading partners.
The latest restrictions imposed by the US will affect US$2 billion worth of Chinese exports and 160,000 jobs, while the EU action will lead to a loss of US$300 million in exports as well as job losses.
"Within each category of product in question, some 1,000 to 6,000 Chinese enterprises would feel the pinch," Bo said.
"We have to make corresponding policy adjustments since the EU and the US have set their controls on Chinese textile exports," said Bo.
"We must be fair to Chinese producers," Bo added.
Bo said he had hoped the earlier announcement of steep tariff rises would help ease concerns of trading partners, but "it is a pity that both the EU and the US failed to accept the policy."
The China Chamber of Commerce for Import and Export of Textile (CCCT) said the adjustment will help ease the burden on Chinese enterprises, which are already operating on razor-thin profit margins.
However, Bo warned enterprises to prepare for further restrictive measures and adapt to a new international trade environment.
Bo said he had noted that some domestic enterprises, under great pressure from the restrictive moves, were calling for retaliation measures, but he ruled out the possibility of a trade war.
"We do not want to see a trade war," he said. "I do not believe retaliation to be the only way (forward) for us. A healthy trade relationship is good for both sides," he added.
Bo stressed the importance of further dialogues with the US and EU to solve the dispute.
Vice-Minister of Commerce Ma Xiuhong is currently in the US for negotiations while Vice-Minister Gao Hucheng has just concluded a tour to the EU.
Although no details of Gao's negotiations were disclosed, an EU trade official told a group of Chinese reporters last week in Brussels that the consultation is very likely to produce an allowed annual growth rate for Chinese textile exports.
However, Bo said China still reserves the right to resort to the World Trade Organization (WTO) to adjudicate the dispute since controlling measures not only violate WTO principles, but are also prejudicial to China.
"We have the right to submit the case to the WTO. Whether we will resort to the WTO, and when, is completely up to us," he said.
The EU decided last Friday to present the dispute to the WTO and attempted to launch safeguard measures on two categories of Chinese textiles-T-shirts and flax yarn-while Washington has begun imposing measures aimed at capping a growth of trade in cotton trousers, cotton-knit shirts and underwear.
(China Daily May 31, 2005)