By Zhou Xin

 

BEIJING (Reuters) - China needs to relax its drive against some low-end exports because of deepening global economic gloom and gird for growing trade protectionism, senior government officials said at the weekend.

 

China has cut refunds of value added tax (VAT) on thousands of products as part of a campaign to rein in exports and so reduce its bulging trade surplus, which is a source of both diplomatic tension and uncomfortably strong domestic money growth.

 

"For labour-intensive manufacturing sectors, further reductions in export tax rebates are not needed," Zhang Xiaoqiang, vice-chairman of the National Development and Reform Commission, told a conference of importers and exporters on Saturday.

 

Zhang, who is in charge of trade-related issues with the economic planning agency, said "stability" should also be the watchword for the processing trade.

 

Beijing introduced a plethora of tax and administrative policies last year to deter such trade, whereby companies transform imported materials and components into finished export articles, adding relatively little value in the process.

 

Many companies in southern China in sectors such as footwear, toys and plastics have been forced to close in recent months as a result of the government's policies and fast-rising labour costs.

 

With some exporters now struggling to stay afloat, Zhang said China should not be shy about encouraging exports as demand from the United States, the European Union and Japan weakened.

 

"You might have worried about trade rows last year," he said. "But now if you're worried about going bankrupt, your priority is how to survive. If a trade dispute crops up, let's just deal with it then."

 

TRADE ROWS

 

Li Ling, the Ministry of Commerce official in charge of fair trade, told the conference that slowing international trade could make China's exports a bigger target for complaints.

 

"This year global economic growth has slowed, and in some countries trade protectionism may lift its head," she said, according to a report on the Caijing business magazine website.

 

"China's exports may remain vigorous, and this may lead other countries to take anti-subsidy, anti-dumping and protective measures against China," she said.

 

Zhang said the rising yuan was also a concern to business. "Some exporters don't even want to take export orders for the third quarter because they have no idea how much the yuan will appreciate," he said.

 

But he said the overall competitiveness of Chinese products was still strong, and Beijing should keep up its drive against exports from dirty, energy-guzzling industries.

 

"China is the workshop of the world, but China should not be the world's workshop of energy-intensive and polluting products."

 

Like Zhang, Vice-Minister of Commerce Fu Ziying also put the emphasis on policy stability to ward off an abrupt drop in exports.

 

"Premier Wen Jiabao has said the year 2008 would be the most difficult year for the Chinese economy, and this is particularly true in the foreign trade arena," Fu said.

 

Li singled out trade restrictions from the United States and the European Union as her biggest worry, with the most troubled sectors including steel, textiles, machinery and ship-building.

 

Senior EU officials met their Chinese counterparts in Beijing last week in a bid to ease tensions caused by China's big surplus with the 27-member bloc.

 

Last year, China was the target of 81 such trade measures. In the first three months of this year, the country had been targeted by 17 anti-dumping and anti-subsidies cases, Li said.

 

Chinese exporters should join more in government efforts to challenge such protectionist steps, especially in fighting U.S. anti-subsidy cases that claim the government gives unfair tax and other economic support, she said.

 

With a quota deal on Chinese garment exports to the United States due to end next year, that sector too "may encounter new situations and trade friction may grow", Li said.