China issued rules aimed at reining in burgeoning textile exports through a quota system, its latest and possibly most significant effort to defuse a simmering trade dispute with the United States and Europe.
Beginning July 20, China-based textile firms exporting to countries that have imposed limits on imported Chinese products must apply for temporary export approval permits. The procedure effectively determines how much each firm gets to sell to major overseas markets. It also curbs the flexibility briefly enjoyed by Chinese manufacturers after the lifting of global trade restrictions at the end of last year. That led to a surge in China's garment exports and triggered a major backlash, especially in the United States and Europe.
The publication of the rules late Sunday on China's Ministry of Commerce Web site follows an agreement between China and Europe signed earlier this month that caps growth of certain Chinese clothing exports to the European Union.
Earlier this year, China voluntarily imposed export tariffs on its garments, but the tariff levels were criticized by the United States and Europe as too low to be effective.
China is due to begin trade negotiations with the United States, which in recent months has imposed quotas on Chinese items such as cotton trousers and shirts.
Cao Xinyu, deputy chairman of China's Chamber of Commerce for Imports and Exports of Textiles, said the new system covers the categories limited by the United States, evidence that Beijing is adopting a cooperative stance toward Washington before bilateral talks begin.
Under the new guidelines, each firm's quota allotment will be determined by a formula based on its export history over the past year, with regulations apparently favoring manufacturers that exported more this year. As stated on the ministry's Web site, the formula will allocate 30 percent of a firm's total quota allotment based on exports made before Jan. 1, 2005, and 70 percent to exports made this year. Quotas won't be sold publicly by authorities this year, and manufacturers are prohibited from trading or selling quotas among themselves.
Manufacturers, which generally greeted the new rules with caution as they await more details, expressed doubt as to whether authorities will be able to prevent black-market trading of quotas. The practice was common under the pre-2005 quota system and sometimes led to anomalies such as the cost of the quota being equal to or surpassing the cost of manufacturing the garments, say people in the industry.
Analysts said they expect limited impact on China and Hong Kong textile shares, which have plunged in recent months because of the textile spat between Beijing and its trading partners.
Li Zhixian, senior textile analyst at Guotai Junan Securities in Beijing, said the impact of such limitations already has been factored into the share prices of many listed textile companies.
However, Solon Gong, a textile analyst at Xiangcai Securities Co. in Shanghai, said the rules would help ease uncertainties, "which is positive for the sector."
Qiu Haixu in Beijing contributed to this report.