Premier Wen Set Tone for China’s Foreign Trade 2011

Chen Deming， China’s Minister of Commerce， remarked at the Fourth Session of the 11th National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) on March 7th that the principle for this year’s foreign trade policy is to “stabilize exports， boost imports while having a lower trade surplus.”According to Mr. Chen， China’s exports would see a mild increase this year; on the other hand， the growth of imports， pushed by a series of import-driving policies， was likely to soon outpace that of exports， which means that the country’s trade surplus would narrow this year. “Trade surplus in proportion to GDP would continue to drop; the possibility that China would register trade defi cits in some months could not be ruled out.” The proportion was 3.1 percent for last year.In the 2011 Report on the Work of the Government， regarding to the foreign trade work this year， Wen Jiaobao， Premier of the State Council， emphasized that the government would eff ectively change the way foreign trade develops， attach equal importance to exports and imports， and promote the coordinated development of overseas Chinese investment and the utilization of foreign capital in China.Huo Jianguo， Director of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce， told reporters that detailed description of foreign trade in the 2011 Report on the Work of the Government settled at least two long-standing disputes. One is how to balance the relationship between the transformation of foreign trade and maintaining the growth of foreign trade volume. T e other is dispute about processing trade， which was resolved in the report by ruling both general trade and processing trade at the same time.Settling two disputes.Chinese government puts more emphasis on the quality， instead of quantity， of foreign trade development.Premier Wen emphasized that the government should ensure the steady growth of foreign trade on the basis of putting great eff ort into optimizing the trade mix and increasing profitability. In both general trade and processingtrade exports， it is essential we continue to make the most of our advantages in labor resources; reduce the consumption of energy and resources; move higher up the industrial chain; and raise quality， grade and value-added.Liu Xu， Director of the International Trade Office of the Institute of Foreign Economics under the National Development and Reform Commission(NDRC) concluded that “optimizing the trade mix” and “increasing profitability” are both concrete means to transform the development mode of foreign trade， which would be the focus of foreign trade policies in the next fi ve years or even longer. It is clear that Chinese government puts more emphasis on the quality， instead of quantity， of foreign trade development.Actually， the special plan under study about foreign trade in the Twelfth Five-Year Plan also attaches great importance to the transformation of foreign trade development， trying to improve the quality of foreign trade and avoid setting quantitative targets directly while maintaining certain growth targets. According to the current exposure draft， China’s foreign trade may meet the target of more than four trillion U.S. dollars by 2015 as long as it grows by nine percent every year during the 12th Five-Year Plan， which runs from 2011 to 2015.Ever since the breakout of the fi -nancial crisis， as a result of the sluggish demand in the overseas market， there has been much dispute about how to maintain the balance between the temporary policy of sustaining economic growth and the long-term policy of transforming the development mode of foreign trade. T e 2011 Report on the Work of the Government settles these disputes， which attaches equal importance to optimizing the trade mix and stabilizing the foreign trade growth.Based on the report， Liang Yaowen， a deputy to the National People’s Congress and the General director of the Department of Foreign Trade And Economic Cooperation Of Guangdong Province， stated that “to stabilize the growth of foreign trade relies on optimizing the trade mix and increasing profi tability，” which are both precondition and requirements. Mr. Liang also noticed that it was the first time that high-level leaders attached equal importance to general trade and processing trade in a pretty detailed manner.Before the financial crisis， the Chinese government had been trying to restrict the development of processing trade to deduce trade surplus， with an aim to transforming processing trade， which naturally creates trade surplus， to general trade， which brings about higher value-added. Last year it was said that new products would probably be added to the Catalogue of Restricted and Prohibited Commodities in Processing Trade， which might be to meet the requirements of reducing carbon emission. Later the structural adjustment was shelved due to the breakout of the fi nancial crisis.Mr. Huo said the Report paid equal attention to general trade and processing trade， which means policy for processing trade would not be so tight as it had been before the fi nancial crisis. Underlying the changes are concerns for maintaining economic growth and a gradually lowering proportion of processing trade in the country’s total import and export volume. According to the current consideration of transforming processing trade， the government prefers processing trade enterprises to move domestically， from southeast coastal areas to central and west regions.Three measures take eff ect all together.If all three measures can be carried out， import can be successfully boosted.Premier Wen also demonstrated how to realize the balance between import and export in the 2011 Report on the Work of the Government. It states that， “We will actively expand exports of Chinese brand goods. We will energetically develop trade in services and service outsourcing and constantly raise the proportion of trade in services in our foreign trade… will increase imports of advanced technical equipment， key parts and components， and energy and raw materials; and promote increases in imports from the least developed countries and from countries with which China has a large trade surplus to gradually correct trade imbalances and properly handle trade frictions.”“The future work on import is clear，” Huo Jianguo remarked. First， it would be a common way to facilitate import so as to increase import. Second， it is advisable to lower import duty and import link value-added tax particularly for products in the category of encouragement. Third， we should provide priority loans or discount interest loan for the import of advanced technical equipment of major enterprises in key industries to encourage the technical reconstruction and technology upgrading of enterprises. “If all three measures can be carried out， import can be successfully boosted，” said Mr. Huo.According some offi cial of foreign trade， it is the fi rst time for the Chinese government to put so much emphasis on increasing import although it had talked about raising import in the past.“Provinces are all notifi ed to place great emphasis on increasing import as a focus of this year’s foreign trade work.”T e Ministry of Commerce will organize a nation-wide work conference on expanding import in the first half of this year. “The task and measures for individual province will be further defi ned; concrete steps for import expansion will hopefully come out then.”(Author: from The 21st Century Business Herald)