China’s foreign trade is composed of three parts, namely technological trade, service trade and commodity trade.

Section I:  Technological Trade

China signed 9,902 contracts to import technology in 2005, resulting in an increase of 15.1% over the previous year, with contractual funds amounting to 19.05 billion US dollars, up 3.01%. Of this, 11.83 billion US dollars comprised technology fees, accounting for 62.1% of the total contractual funds. Both contract volume and contract values hit a record high.

As follows are the features of imported technology in 2005:

1. Importation of technology maintained a rapidly growing trend. Both contract volume and contract values increased sharply over the previous year. Contract volume registered a surge of 15.1% year on year, while contract values increased 37.5%.

2. Importation of technology was conducted mainly in the form of proprietary technology, which accounted for 28.0% of the total. Complete sets of equipment, key equipment and production lines made up 26.7% of the total. Technical consulting and technical services accounted for 24.9% of the total. All the three aspects above accounted for a combined 79.6% of the total.

 

Statistics on technology import in 2005 by import forms

(Unit: 1,000 US dollars)

3. Sources of technological imports became more diversified. China imported technology from 68 countries and regions in 2005. The EU, Japan, and US remained the major sources of China’s technological imports.

EU was the top source of China’s technological imports in 2005. China signed contracts to import technology valued at a total 9.07 billion US dollars in 2005, an increase of 64.5% over the previous year, accounting for 47.6% of the total contractual funds. Technological imports from the EU exceeded the value of contracts China signed with Japan and the US. Of this, 5 billion US dollars of imports were made from Germany, up 127.8% over 2004, accounting for 55.1% of the total contract value from the EU. Germany replaced Japan and the US for the second time as the top source of China’s technological imports. China imported technology valued at 3.85 billion US dollars from Japan, up 31.4%, ranking Japan as China's second largest trading partner. From the US, China imported technology valued at 3.4 billion US dollars, up 16%, ranking the US as China's third largest trading partner.

 

Top ten sources (EU, ASEAN) participating in China’s technological imports in 2005

(Unit: 1,000 US dollars)

Most EU countries exported technology to China. If EU member countries were separately listed in the table above, there would be five EU member countries among the top ten countries and regions. Among EU member countries, Germany, France, and Italy held the top three ranks in terms of total value of technological imports made by China from EU, accounting for 55.1%, 14.9%, and 6.1% respectively.

 

Top ten countries and regions participating in China’s technological imports in 2005

(Unit: 1,000 US dollars)

4. State-owned enterprises and foreign enterprises were the main importers of technology in China. Additionally, collective enterprises and private enterprises imported technology in rapidly increasing volume.

The value of technology imported by state-owned enterprises exceeded that of foreign enterprises for the first time, representing a major source of technological imports.

Statistics on imports of technology in 2005 by enterprise type:

(Unit: 1,000 US dollars)

5. As China’s railway construction sped up in 2005, railway sectors introduced a large sum of import contracts concerning electric steering engines and related manufacturing technology. Therefore, the railway transportation industry replaced the electronic information industry as the top industrial importer of technology in China.

      

Top ten sectors of technological imports in 2005

(Unit: 1,000 US dollars)

 

6. Technological imports were distributed mainly throughout developed eastern developed regions of China. The country’s top five destinations of technological imports were Shanghai, Beijing, Zhejiang, Anhui, and Jiangsu, which took up 73.1% of the total contractual funds registered in various local commerce bureau or commission bureaus of foreign economic relations and trade in 2005.

 

Section II: Service Trade

I. China’s service trade in 2005

China saw an increase in scales of service trade in 2005, with the deficit decreasing for the first time in the past five years. Total revenue and expenditure of international service trade reached 158.2 billion US dollars in China in 2005, jumping 18.2%, accounting for 7% of China’s GDP in the year, a slight increase over 2004. Revenue increased by 19% to reach 74.4 billion US dollars; and expenditure increased by 16% to 83.8 billion US dollars. Service trade experienced a deficit of 9.4 billion US dollars in the year, down 3%. Transportation, tourism, and other commercial services were still the top three service trade items in the country, with total revenue and expenditure scale accounting for 4/5 of the total of service trade.

China’s service trade reported faster growth in 2005. Most sectors of the service trade realized increases to varying degrees, reflecting an overall reinforcement competitiveness in China’s service industry. Overall development demonstrated a positive trend. Transportation, tourism, and other commercial services were the main source of service trade revenue, presenting income of 15.4 billion US dollars, 29.3 billion US dollars and 16.9 billion US dollars in 2005, up 28%, 14% and 6% over 2004, respectively. The three sectors accounted for 21%, 39% and 23% of the total revenue of service trade respectively, taking up 83% of the total. The proportion of transportation revenue increased by two percentage points, while the proportion of the tourism sector dropped two percentage points and other commercial services dropped three percentage points. Revenue of film, audio and video services, construction services, and technical consulting services recorded the top three increases of 227%, 77% and 69%, respectively. These changes can be attributed to the rapid growth of China’s cargo trade as well as continuous increases of tourism and business activities in China.

China saw a steady increase of import in the service trade in 2005. Transportation, tourism, other commercial services and insurance were still the main factors of expenditures in service trade, presenting expenditures of 28.4 billion US dollars, 21.8 billion US dollars, 9.4 billion US dollars, and 7.2 billion US dollars in 2005, an increase over 2004 of 16%, 14%, 11%, and 18% respectively. The four sectors accounted for 34%, 26%, 11%, and 7% of total expenditure in service trades respectively, taking up 78% of the total. Meanwhile, with the exception of film, audio and video services which reported a drop in expenditure, all other sectors recorded increases.

II. Main features of development in China’s service trade in 2005

1. Scales of service trade deficit decreased slightly. China’s service trade in 2005 curbed its continuously rapid growth of trade deficit in recent years, with the deficit decreasing by 300 million US dollars when compared with that of 2004. From analysis of the structure of sources of service trade deficit, the main items causing the deficit remained unchanged, still concentrated in transportation, with trade deficit amounting to 13 billion US dollars, up 4%; insurance at 6.7 billion US dollars, up 16%; franchise rights and royalty fee at 5.2 billion US dollars, up 21%. The deficit of transportation nearly equaled the total of other items. Surplus mainly concentrated in tourism and other commercial services, with surplus scales of 7.5 billion US dollars each, up 14% and 0.3% respectively.

2. The deficit in transportation and insurance slowed its growth. Rapid growth in exports of goods  drove a rapid surge of revenue in  transportation and insurance. The growth rate of goods imported slowed down. Accordingly, the growth rate of expenditures slowed down among transportation and insurance industries related to imports. Transportation revenue reached a total of 15.4 billion US dollars, up 28%; expenditure was 28.4 billion US dollars, up 16%; and the deficit was 13 billion US dollars, up 4%. Insurance revenue totaled 0.6 billion US dollars, up 44%; expenditure was 7.2 billion US dollars, up 18%; and the deficit was 6.7 billion US dollars, up 16%.

3. The gap of surplus in tourism was further expanded. As China opened up and deepened international communication, tourism revenue and expenditure increased rapidly. Tourism revenue totaled 29.3 billion US dollars in 2005, and expenditure 21.8 billion US dollars, with a surplus of 7.5 billion US dollars, up 14%.

4. The deficit between franchise rights and royalty fees increased rapidly. China charged fees for franchise rights and royalties of 5.3 billion US dollars in 2005, up 18% over 2004. While revenue was less than 0.2 billion US dollars, down 33%. The deficit was 5.2 billion US dollars, up 21%. It showed that there was still much progress to be made in China’s improved ability to make independent innovations.

5. Revenue increased rapidly among film, audio and video industries, easing the deficit. Due to the sale of TV broadcasting rights for the Beijing 2008 Olympic Games, China’s film, audio and video revenue doubled, totaling 130 million US dollars. Additionally, as China’s domestic TV and radio industry charged substantial fees for producing Formula One World Championship and related sports reporting, expenditures for imported services totaled 150 million US dollars, down 12%. The deficit was 20 million US dollars, down 85%.

6. The trade surplus of construction services increased rapidly. Revenue totaled 2.6 billion US dollars, up 77%; the deficit was 1.6 billion US dollars, up 21%; and the surplus was 1 billion US dollars, up 654%. This change was attributed mainly to Chinese enterprises rapidly increasing participation in international projects and labor projects.

7. The trade surplus of other commercial services remained at a level equal to that of the previous year. The revenue of China’s other commercial services (including entrepot trade, commission and drawbacks) demonstrated a trend of expansion in 2005. Revenue topped 16.9 billion US dollars, up 6%; expenditure was 9.4 billion US dollars, up 11%; the trade surplus was 7.5 billion US dollars, equaling to that of the previous year.