Processing trade to get a boost ( 2004-01-15 22:40) (China Daily)
China will continue to push the processing trade sector, the backbone of the
country's overall exports and imports, Vice-Premier Wu Yi said yesterday.
The move will also benefit the global economy and overseas investors, experts
pointed out.
The central government will further support the processing trade sector and
step up efforts to readjust and upgrade its industrial structure in the coming
years, Wu said at a national seminar held by the Ministry of Commerce (MOC).
She also wants competent ministries and commissions to be active in improving
the investment environment, intensifying intellectual property rights protection
and fostering more professionals to facilitate the development of the sector.
"Processing trade plays an important role in China's opening up and economic
development. And thanks to its fast growth, China now has become one of the
world's big trading powers," Wu said.
Processing trade, which has grown by 243-fold since China launched the
opening and reform drive in 1979, has helped to optimize the overall industrial
structure,fatten foreign exchange reserves, and bring closer economic ties
between the mainland and Hong Kong, Macao and Taiwan, according to the
vice-premier.
It also helps to alleviate unemployment.
The processing trade volume reached a record US$404.8 billion or 48 per cent
of total trade value in 2003, according to Yu Guangzhou, vice-minister of
commerce.
And favorable changes have also taken place in the sector in recent years, Yu
said.
Processing trade, which was formerly labour-intensive, has become
capital-intensive as overseas businesses invest heavily in manufacturing
high-tech products such as compute hardware, chemicals and auto parts.
From January to October of 2003, exports of machinery and electronic products
totalled US$133.1 billion, taking up 70 per cent of the entire processing trade
volume.
Encouraged by the country's enormous market potential and cheap labour
resources, foreign investors launched long-term investment in China.
"We now have seven joint ventures and two research and development centres in
China, which produce with the same technologies as those used at our base (in
Finland)," said Wang Jianhui, vice-president of Nokia (China) Investment Co Ltd.
Meanwhile, inward processing, a much more advanced and technology-demanding
way of processing that uses imported materials other than those provided by
clients, has become the mainstay of the sector, Yu said.
In 2003, some 74 per cent of processing trade production was achieved through
processing with imported materials.
The sector also serves well as a platform to lure overseas funds.
According to Yu, about 80 per cent of the processing trade was financed by
overseas investors in 2003.
Despite recent advances, Wu Yi cautioned that technological innovation by
Chinese enterprises is still lagging far behind developed countries.
Giving priority to processing trade is of critical importance to maintaining
China's economic growth rate, experts say.
"It remains a key engine of the national economy and a major booster of the
gross domestic product," Fan Ying, a trade expert at the Foreign Affairs College
in Beijing, told China Daily.
Meanwhile,the world economy will benefit from the fast growth of China's
processing trade sector, she believes.
"Conducting processing trade with China is a wise choice, as production costs
can be greatly slashed by using the country's relatively cheap labour," Fan
said.
The country is an ideal manufacturing base as multinationals in developed
countries are readjusting their resources on a global basis.
In the bigger picture, she added, a flourishing processing trade in China may
provide the international market with good products at low prices.
"This is a win-win situation for both China and developed countries. China
only obtains a part, and in many cases a small part, of the returns from the
processing trade,'' she said.
