China will raise the export rebate on textiles and garments by another percentage point to help the industry cope with falling demand and weaker prices.

The country has already increased tax rebates for the industry three times since last August. The new increase to 16% will be effective from 1 April, the Ministry of Finance said on Friday (27 March).

It applies to fabrics and garments made from silk, wool, cotton, and man-made fibres, including both knitted and non-knitted clothing.

Rebates for leather products such as coats, belts and gloves will increase to 13%. There is no subsidy on shoe exports.

Exports account for about a fifth of China's GDP and are important for employment, said Liu Jing, finance professor at Cheung Kong business school in Beijing.

But so far increasing subsidies "hasn't helped much", he said. "Exports are dropping pretty significantly."

China's textile and garment exports dropped 32.9% in February compared with the previous month, according to China customs. Weaker demand is also pushing down prices and profits.

In China's southern manufacturing zones, more than 2,000 garment factories have closed or delayed operations, estimates Willy Lin, chairman of the Hong Kong Knitwear Exporters & Manufacturers Association. 

Some larger factories are getting more business as retailers start to restock inventory in a market with reduced supply.

"More orders are going to the bigger factories," said Delina Deng, export manager at Monartex. "The smaller ones have all closed."

By Dominique Patton.