According to the requirements of market economy, and in line with its obligations as a WTO member, China is establishing a stable and transparent economic management system involving foreign countries, and creating a fair and foreseeable legal environment. The newly revised “Foreign Trade Law of the People’s Republic of China”, which has become effective as of July 1, 2004, is the basic law guiding China’s foreign economic exchange and trade, as well as the legal basis for China to establish its economic and trade management system involving foreign countries, and the basis for China to establish its foreign economic cooperation management system and for the government to wield its power in economic and trade field. And on this basis, a series of supporting measures and rules will be promulgated.

China ranked third in volume of imports and exports, as in 2004. China’s portion of world trade increased. In 2001, China’s import and export volume exceeded 500 billion US dollars for the first time.

 China’s import and export volume reached a total of 1.4221 trillion dollars, up 23.2% from 2004. Exports reached 762 billion dollars, up 28.4%. Imports reached 660.1 billion dollars, up 17.6%. Exports exceeded imports by 101.9 billion US dollars (see Chart 6). Within China’s import and export volume, the total import and export volume of foreign enterprises was 831.7 billion US dollars, up 25.4% from 2004. Of foreign enterprise trading, exports reached 444.2 billion dollars, up 31.2%. Imports reached 387.5 billion dollars, up 19.4%.

 

China’s imports and exports in 2005

(Unit: 100 million US dollars)

The European Union (EU) maintained its status as China's largest trading partner, with bilateral trade volume reaching $217.31 billion dollars in 2005. The United States was China's second largest trading partner, with bilateral trade volume reaching $211.63 billion dollars. Japan was China’s third largest trading partner, with a bilateral trade volume of 184.44 billion dollars. The position of the EU, the United States and Japan as China’s top three trading partners will not be changed in the coming few years. These three global partners will dominate China’s foreign trade pattern for the next several years.

China’s trade with its top 10 trading partners, including the EU, the US and Japan, totaled $1422.12 billion dollars in 2005, accounting for 81.5% of the country’s total volume of imports and exports.

China has trade relations with more than 220 countries and regions at present. The top 10 trading partners are: the EU, the US, Japan, Hong Kong SAR, ASEAN, the Republic of Korea, Chinese Taiwan, Russia, Australia and Canada.

 

China’s imports from and exports to major countries and regions in 2005

(Unit: 100 million US dollars)

Top 10 trading partners

No.	Country, region	2005	change over 2004 ％	Proportion (%)	Proportion change
	Total value	14,221.2	23.2	100.0	0.0
1	EU	2,173.1	22.6	15.3	-0.1
2	US	2,116.3	24.8	14.9	0.2
3	Japan	1,844.4	9.9	13.0	-1.5
4	HK SAR	1,367.1	21.3	9.6	-0.2
5	ASEAN	1,303.7	23.1	9.2	0.0
6	ROK	1,119.3	24.3	7.9	0.1
7	Taiwan, China	912.3	16.5	6.4	-0.4
8	Russia	291.0	37.1	2.0	0.2
9	Australia	272.5	33.6	1.9	0.1
10	Canada	191.7	23.5	1.3	0.0

 

 

Top 10 export markets

No.	Country, region	2005	change over 2004 ％	Proportion (%)	Proportion change
	Total value	7,620.0	28.4	100.0	0.0
1	US	1,629.0	30.4	21.4	0.3
2	EU	1,437.1	34.1	18.9	0.8
3	HK SAR	1,244.8	23.4	16.3	-0.7
4	Japan	839.9	14.3	11.0	-1.4
5	ASEAN	553.7	29.1	7.3	0.1
6	ROK	351.1	26.2	4.5	-0.1
7	Taiwan, China	165.5	22.2	2.2	-0.1
8	Russia	132.1	45.2	1.7	0.2
9	Canada	116.5	42.8	1.5	0.1
10	Australia	110.6	25.2	1.5	0.0

 

 

Top 10 import sources

No.	Country, region	2005	change over 2004 ％	Proportion (%)	Proportion change
	Total value	6,601.2	17.6	100.0	0.0
1	Japan	1,004.5	6.5	15.2	-1.6
2	ROK	768.2	23.4	11.6	0.5
3	ASEAN	750.0	19.1	11.4	0.2
4	Taiwan, China	746.8	15.3	11.3	-0.2
5	EU	736.0	5.0	11.1	-1.4
6	US	487.3	9.1	7.4	-0.6
7	Australia	161.9	40.1	2.5	0.4
8	Russia	158.9	31.0	2.4	0.2
9	Saudi Arabia	122.5	62.8	1.9	0.6
10	HK SAR	122.3	3.6	1.9	-0.2

 

Top 10 trade deficit sources

No.	Country, region	2005	change over 2004 ％	Proportion (%)
1	Taiwan, China	-581.3	-512.3	13.5
2	ROK	-417.1	-344.3	21.1
3	Japan	-164.6	-208.4	-21.0
4	Malaysia	-94.9	-100.9	-5.9
5	Saudi Arabia	-84.2	-47.5	77.4
6	Philippines	-81.8	-47.9	70.9
7	Angola	-62.1	-45.2	37.2
8	Thailand	-61.7	-57.4	7.5
9	Brazil	-51.6	-50.0	3.3
10	Australia	-51.2	-27.2	88.5

 

Top 10 trade surplus sources

No.	Country, region	2005	change over 2004 ％	Proportion (%)
1	US	1,141.7	802.6	42.3
2	HK SAR	1,122.5	890.7	26.0
3	Holland	229.5	155.5	47.6
4	Britain	134.5	102.1	31.8
5	United Arab Emirates	66.8	55.4	20.7
6	Spain	63.5	37.3	70.3
7	Italy	47.6	27.7	71.9
8	Canada	41.4	8.1	410.6
9	Belgium	37.3	23.4	59.6
10	Turkey	36.3	22.3	62.8
Remarks: The trade surplus against EU was 70.12 billion US dollars in 2005, up. 89.1% over 2004

 

Diagram of China’s import and export growth

(Unit: 100 million US dollars)

Section I: Foreign Trade Laws and Regulations

Up to present, China has established a complete foreign trade legal system with the “Foreign Trade Law of the People’s Republic of China” at the core.

I. Foreign Trade Law

“Foreign Trade Law of the People’s Republic of China” (abbreviated as “Foreign Trade Law”, effective as of July 1, 2004, is the basic law for China to standardize its foreign trade activities. The principles of the law are:

Article 1 This Law is formulated with a view to developing the foreign trade, maintaining the foreign trade order, protecting the legitimate rights and interest of foreign trade operators and promoting a healthy development of the socialist market economy.

Article 2 This Law applies to foreign trade as well as protection of intellectual property rights. Foreign trade as mentioned in this Law shall cover the import and
export of goods, technologies and the international trade in services.

Article 3 The authority responsible for foreign trade and economic relations under the State Council is in charge of foreign trade of the entire country pursuant to this Law.

Article 4 The State shall apply the foreign trade system on a uniform basis and maintain a fair and free foreign trade order in accordance with law.

Article 5 The People's Republic of China promotes and develops trade ties with other countries and regions, signs or participates in such regional economic and trade agreements as CUA and FTA, and joins in regional economic organizations on the principles of equality and mutual benefit.

Article 6 The People's Republic of China shall, under international treaties or agreements to which the People's Republic of China is a contracting party or a participating party, grant the other contracting parties or participating parties, or on the principles of mutual advantage and reciprocity, grant the other party most-favored-nation treatment or national treatment within the field of foreign trade.

Article 7 In the event that any country or region applies discriminatory prohibition, restriction or other like measures against the People's Republic of China in respect of trade, the People's Republic of China may, as the case may be, take counter-measures against the country or region in question.

II.Rules on management of foreign trade operators

Besides the stipulations of “Foreign Trade Law” in respect of this, another important basis is: “Regulations on Management of Qualification of Importers and Exporters”.

III.Rules on management of import and export commodities

A major rule in this regard is “Regulations of the People’s Republic of China on Management of Import and Export Commodities”.

Other important rules concerned: “Measures on the Management of Goods Export Licenses” and “Measures on the Management of Goods Import Licenses” and corresponding catalogue of goods with import and export licenses, “Regulations of the People’s Republic of China for the Environmental Management on the First Import of Chemicals and the Import and Export of Toxic Chemicals” and the implementing rules, “Interim Regulations for Environmental Protection on Import of Wastes”, etc.

IV.Inspection of import and export commodities, quarantine of animals and plants, health quarantine

1.Major laws and regulations governing inspection of import and export commodities: “Law of the People’s Republic of China on Commodity Inspection” and implementing regulations, etc.

2.Major laws and regulations governing quarantine of animals and plants: “Law of the People’s Republic of China on Entry and Exit of Animal and Plant Quarantine” and implementing regulations, etc.

3.Major laws and regulations governing health quarantine: “Frontier Health and Quarantine Law of the People’s Republic of China” and implementing regulations, “Food Hygiene Law of the People’s Republic of China”, “Measures on the Management of Pharmaceutical Import”, etc.

V.Laws and regulations on foreign exchange control

The basic law concerning foreign exchange control in China is “Regulations of the People’s Republic of China on Foreign Exchange System”. Other major rules and regulations: “Circular of the People’s Bank of China on Further Reforming Foreign Exchange System”, “Regulations on Forex Sale, Purchase and Payment”, “Measures on Management of Foreign Exchange Settlement under Current Accounts”, etc.

VI.Customs and tariff laws and regulations

1.Customs law and regulations: the “Customs Law of the People’s Republic of China”, “Regulations of the People’s Republic of China on the Customs Protection of Intellectual Property Rights”, “Regulations of the People’s Republic of China on the Inspection Conducted by Customs”, etc.

2.Regulations concerning tariff: “Regulations of the People’s Republic of China on Import and Export Duties”.

VII.Foreign-related civil and com- mercial laws

As China opens wider to the outside world, the country is increasingly paying attention to legislation of foreign-related civil and commercial laws. “Law of the People’s Republic of China on Economic Contracts Concerning Foreign Interests” was promulgated on March 21, 1985. This is the first legislation concerning economic and trade contract in China. On April 21, 1986, “General Provisions of Civil Law” was promulgated, an important step for China in the field of civil and commercial legislation.

VIII.International economic and trade treaties and customs

China has up to present signed bilateral trade agreements or treaties with more than 100 countries and regions, in which the two sides have defined the general principles for trade, while import and export of commodities have been left to trade companies of the two countries to handle. All payments are made in cash, except for few countries where account settlement is adopted.

Meanwhile, China has participated in many treaties concerning international trade, and accepted and adopted many internationally prevailing practices, regulations or demonstration rules. Such international practices as “Explanatory General Rule of International Commercial Terminology”, “Warsaw-Oxford Rules 1932”, “Uniform Rules for CT Document”, “Uniform Customs and Practice of Documentary Credits”, and the “Uniform Rules for Collections” are playing an important role and influence in China’s foreign-related economic and trade activities.

 

 

 

Section II: Foreign Trade Management

“Foreign Trade Law of the People’s Republic of China” stipulates that China practices a unified foreign trade system, safeguards a fair and free economic trade order according to law, and allows free import and export of goods and technologies (except those for which laws and regulations have separate stipulations).

The Chinese Government will gradually reform its foreign trade system according to the “Protocol on the Accession of the People’s Republic of China” and the annex and “Report of the Working Party on the Accession of China” signed when China entered the WTO.

I.Trade right

The right of trade refers to the right to import and export in goods trade, excluding the right of distribution on domestic market.

An outstanding feature of the latest revised “Foreign Trade Law” is abolishment of examination and approval of the right to handling foreign trade, replacing the 50-year-old system with a registration system. Related implementing rule is “Measures for the Archival Filing and Registration of Foreign Trade Business”. The Ministry of Commerce (MoC) is the authoritative department in charge of archival filing and registration of foreign trade businesses, and the work has gone on-line and is managed locally. MOC has entrusted eligible local foreign trade departments to handle the archival filing and registration procedures locally.

China will gradually lower the minimum registered capital requirements for Chinese enterprises for obtaining foreign trade right, and will gradually grant full trade right to foreign-invested enterprises.

II.State trade and authorized oper- ation

China practices State trade over 8 categories of commodities that have a bearing on the national economy and people’s livelihood, namely grain, cotton, vegetable oil, edible sugar, crude oil, finished oil, fertilizer and tobacco, and exerts State trade management on export of tea, rice, maize, soybean, tungsten ores, ammonium paratungstate, tungsten products, Coal, crude oil, finished oil, silk, unbleached silk, cotton, cotton yarn, cotton woven fabrics, stibium ores, stibium oxide, stibium products, and silver.

China allows non-governmental enterprises to handle import and export of certain amount of goods under the State trade management.

To safeguard the import and export order, foreign economic and trade department under the State Council may exert authorized operation and management within a specific time limit, that is, authorizing some companies to undertake import and export business of certain products as proxy.

Products under authorization at present are natural rubber, timber, plywood, wool, acrylic fibers and steel products. Operation of these products was opened three years after China joined the WTO.

Enterprises or other organizations that are not on the list of State trade enterprises and authorized enterprises can on no account engage in State trade management, and import and export of commodities whose operation and management are authorized.

III.Customs tariff and other taxes and fees

China has adopted “Harmonized Commodity Description and Coding System” (“HS”) starting from January 1, 1992. In the same year, it joined “Convention on Harmonized Commodity Description and Coding System”.

According to China’s commitment to the WTO, China’s tariff level as a whole will decrease from 14% to about 10% by 2005. Tariff on industrial products will decrease from 13% to 9.3%; and on agricultural products, from 19.9% to 15.5%. Implementation of tariff concession for agricultural products has ended in 2004, while that of tariff concession for 98% of industrial products will end in 2005. However, tariff imposed on motor vehicles and spares and fittings will be lowered to 25% and 10% (average level) respectively on July 1, 2006, and tariff concession for some chemical products will not end until 2008.

Upon its entry into the WTO, China has automatically joined “ Information and Technology Agreement” (ITA), and has gradually abolished all tariffs on ITA products before 2005

IV.Non-tariff measures and import-export licensing procedures

China has abolished non-tariff measures governing 400-plus tariff codes as late as on January 1, 2005, including quota and license, and the products involved include automobile, electromechanical products, natural rubber, and color sensitive materials. But before then, quota of certain products has enjoyed growth to certain extent.

1.Import licensing procedure

China exerts quota management over commodities whose import is restricted in quantity; and licensing management over other commodities whose imports are just restricted. For commodities with import quotas, import quota management departments will publish the total import quota for the next year before July 31 every year.

In view of the demand for monitoring import of commodities, automatic import licensing system has been introduced for some free imports of commodities. If commodity import is listed under the management of automatic import licensing, the importers should submit automatic import license application to foreign economic and trade department or economic management department of the State Council before going through customs procedure.

To maintain the international balance of payments, China may adopt interim restriction measures on value or quantity of imports at the time when the international payments lose balance or there is serious threat of unbalance, or when it wants to maintain a foreign exchange reserve that adapts to its economic development plan.

Starting from January 1, 2005, China has abolished import quotas on automobiles and key parts and disc production equipment. Thus, all import quotas imposed on ordinary commodities have been removed, and the government has only retained its import quota licensing management over three specific commodities of chemicals under State control, toxic chemicals and ozone-consuming materials. As for automobiles and key parts and disc production equipment, they are no longer under quota restrictions starting from 2005. Plus other ordinary commodities that have been release of control before, import quota licensing management on ordinary commodities has all been removed. This indicates that any enterprise with independent foreign trade right may apply to import ordinary commodities.

This is the fourth time for China to reduce the number of commodities under management of import quota licensing. Starting from January 1, 2002, China has removed import quota management on 14 kinds of ordinary commodities, reducing the number that is still under the management to 12. Then it further reduced to number of 8 in 2003 and to 2 in 2004. Starting from 2005, the number is reduced to zero.

China exerts systematic management over import of electromechanical products under the category of import forbidden, import restricted and automatic import licensing. For electromechanical products whose imports are restricted, if it is quantity restriction, quota management applies; if there is no quantity restriction, such products are called specified electromechanical products, and licensing management will apply. To import specified products, the procurement must be conducted by way of international bidding.

For electromechanical products that automatic import licensing applies, the importers should apply for “automatic import certificate” before going through customs procedures.

China forbids or restricts import of certain commodities, including weapons, ammunition and explosives, narcotics, narcotic drugs, pornographic materials, and food, drugs and animals and plants that do not meet technical standards stipulated in Chinese regulations.

2.Export licensing procedure

China applies export-licensing system to some agricultural products, resource-type products and chemicals.

Unless there are specific stipulations, global export licensing applies to all export commodities listed under export licensing management.

The 47 kinds of commodities (entailing 316 8-digit HS codes) that have been put under export licensing management in 2005 are divided under the categories of export quota certificate, export quota bidding and export licensing management.

For textiles whose export has been restricted by the State, quota and export certificate system applies, and such export will be supervised by customs and inspected by entry and exit inspection and quarantine department according to related regulations.

China forbids export of narcotics, narcotic drugs, materials that contains State secrets, and rare animals and plants.

V.Tariff quota

After its entry into the WTO, China has introduced tariff quota administration over such agricultural products as wheat, maize, rice, cotton, edible sugar, soybean, palm oil and wool and such industrial products as fertilizer and top. Calculation of the tariff quota for agricultural products takes 1995-1997 as base period.

While exerting State trade administration over tariff quota products, China has also left certain tariff quota for nongovernmental trade enterprises.

Import of commodities within the tariff quota will pay tariff at the rate for within the quota; while import of commodities above the tariff quota will be charged an additional rate. Import quota management department will publish the total tariff quota for the next year between September 15-October 14 every year.

VI.Technical trade barriers

The Chinese Government reserves the right to inspect import and export commodities.

According to the principle of national treatment, China has promised that 18 months after its entry into the WTO, all qualified appraising institutions may offer qualification appraising service to both home-made and imported products.

VII.Hygiene and plant hygiene measures

China only introduces hygiene and plant hygiene measures within the limits entailed by protection of life or health of human and animals and plants.

Within 30 days after it became a WTO member, the Chinese Government has informed the WTO of all its laws, regulations and other measures concerning hygiene and plant hygiene, including the scope of finished products, related international standards, guides and proposals.

VIII.Customs valuation

Most Chinese tariffs are ad valorem duties, and the tariff value of import commodities is determined according to cost insurance and freight (CIF) and based on the transaction price stipulated in “Customs Valuation Agreement”.

IX. Place of origin regulation

Section III: Processing Trade and Border Trade

China’s place of origin regulation for import and export is of non-preferential place of origin regulation. Once the international coordination of non-preferential place of origin regulation is completed, China will adopt internationally coordinated non-preferential place of origin regulation.

X.Export duty

China imposes export duties on products under 84 tariff numbers, including eel fry, lead, zinc, tin, stibium, ferromanganese, ferrochrome, copper, nickel and aluminium.

I.Processing trade

Processing trade business (including processing with purchased materials and processing with imported materials) is usually examined and approved by foreign economic and trade departments at the provincial level or below. But for processing of edible sugar, cotton, vegetable oil, wool, natural rubber and crude oil which are under the State overall balance management, the processing enterprise must apply for examination and approval of the foreign economic and trade department of the province where it is registered.

Chinese Customs exerts systematic management over processing trade according to the classification of commodities. Commodities forbidden from processing trade refer to those whose imports are forbidden by the “Foreign Trade Law of the People’s Republic of China”, and those that the customs has no way to exert bonded inspection on; commodities restricted refer to those that do not have a large price gap between the domestic and the international markets, and sensitive commodities; commodities allowed refer to products other than the above mentioned two types.

Chinese Customs exerts systematic administration over enterprises engaged in processing trade, and keeps a dynamic eye over the list of these enterprises.

II.Border Trade

China supports and encourages development of border trade, and administers border trade in two ways as the follows:

1.Market trading with foreign countries by border residents, which refers to the activities of exchange of commodities by border residents within a definite value or amount allowed at open or designated country fairs within 20 km of the borderlines.

Section IV: China’s Anti-Dumping Policy and Procedures

For import of commodities (only limited to articles for daily use) with daily value per capita standing below 3,000 yuan, import tax and import link VAT will be exempted; but for import standing above 3,000 yuan, import tax and import link VAT will be imposed on the excessive part.

2.Small amount border trade, which refers to the small amount trade activities of licensed Chinese enterprises with enterprises and other trade organization of the neighboring countries through designated inland border ports on the inland borderlines.