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China Reforms Processing Trade Management Policy
There has been a major reform in China's management of processing trade, according to an announcement by the State Council and eight departments at the national export processing zone experiment unit conference in Weihai, Shandong.
Why are export processing zones needed?
Since the economic reforms began, China's processing trade has quietly developed. In the eighteen moths between 1981 to 1998, the quantity of imports grew almost 70-fold. In 1996, processing trade imports and exports accounted for more than half (50.6%) of China's total import and export trade for the first time. In 1998, it reached 53.4% and in 1999, 51.2%. In the first five months of this year, processing trade imports and exports accounted for 48.84% of total trade imports and exports. Processing trade has already affected most of China's industries, providing jobs for 30 million people. Processing trade has solved China's problems with a shortage of capital and difficulties with technology and the market.
But the speedy development of processing trade has also brought problems, which cannot be ignored. Several years ago, because China adopted an open management policy towards decentralized businesses, some illegal companies began using the processing trade channel to engage in smuggling and tax evasion. This resulted in huge amounts of tax revenues slipping out of the authorities' coffers and adversely affected state-owned enterprise reforms and China's economic development. According to customs figures, in 1999, Chinese customs uncovered 447 cases of using processing trade to smuggle, worth 2.87 billion yuan. In the first five months of this year, customs officials have uncovered 137 cases of using processing trade to smuggle, worth 842 million yuan.
The party and State Council are both very concerned about processing trade. In order to improve management over processing trade, the State Council has approved for China's first export processing zone to implement a closed management of processing trade.
The Pros of Export Processing Zone
Using export processing zones to manage processing trade enterprises is a "double-win" management model.
First, it centralizes the management criteria of processing trade. It solves the problem of processing trade enterprises opening branches everywhere, making it difficult to supervise them.
Second, customs have reformed the traditional supervision model for processing trade and simplified procedures.
Third, the new management model will spur the export of China's raw materials and spare parts. At the same time, the closed management system will restrict processed finished products from being sold domestically.
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