A Raft of New Policies Positive to Agricultural and Textile Industries     

The sharp rise in government purchase prices for grains to significantly benefit companies in the agricultural sector; Fertilizer makers expected to get a boost from the National Development and Reform Commission's new pass-on mechanism which links prices between agricultural products and fertilizers; Higher export rebate tax on textiles to be positive for the industry in short term.
   In the October plenum, China's top authorities decided to grant farmers more freedom with expanded land transfers. These measures are set to ignite growth for more sizable planting companies, brining more technology and capital into the sector. They will help integrate the agriculture sector and improve the overall business climate.
   The pricing mechanism of major agricultural products is set to be optimized, with the market force to play a key role in boosting yields. The measures mean agricultural products prices will go up by gradually and the time of cheap goods is gone.
   Improving the subsidy system, which includes encouraging yield boosts and increasing subsidies by large margins to farmers, would give significant opportunities for leading companies in the seed processing sector.
   The government's increasing attention on foodstuff security will be conducive to the planting and seed processing businesses, as well as the trading sector which has seen sustained prosperity.
   In 2009, the government will keep issue policies to benefit farmers, by hiking grain purchase prices and subsidies, setting up a mechanism to link fertilizer prices and agricultures, to ensure income for farmers. Farmers' purchasing power and the subsidy system would help trigger fertilizer demand.
   Insiders expect the government will loosen control on fertilizer prices, and farmers will be able to well afford the rising fertilizer prices.
   Apparently the government has realized the tough situation for the nation's textile and garment exports, in which weakness could last for a somewhat long period. The government has raised export rebate rates twice this year, aiming to help companies regain confidence. Market watchdogs estimate China's textile exports could be US$183.6 billion in 2008, among which US$128.7 from general trade. Every 1% rise in the export rebate rate could translate into combined profit increment of RMB8.8 billion for exporters. According to calculation, the rebate rate adjustments will add profit of RMB1.5 billion to the domestic textile firms in 2008.