China issues First White Paper on Foreign Trade
Feb 09, 2012 ｜ by
On Dec. 7th, 2011, on the occasion of the 10th anniversary of China’s World Trade Organization (WTO) accession, the State Council of PRC issued its first white paper on foreign trade, highlighting its achievements in boosting foreign trade and its contribution to the world economy.
“China has been the world’s largest exporter and second-largest importer for two consecutive years by the end of 2010”, said the white paper.
The Contents of the 35-page White Paper mainly consists of eight Chapters: Foreword, Historic Progress in China’s Foreign Trade, Reform of and Improvements to China’s Foreign Trade System, Development of China’s Foreign Trade Contributes to the World Economy, Promoting Basically Balanced Growth of Foreign Trade, Constructing All-round Economic and Trade Partnerships with Mutually Beneficial Cooperation, Realizing Sustainable Development of Foreign Trade and Conclusion.
According to the Paper, over the past 30 years, seizing the opportunity of the world economy’s long-term prosperity and the deepening economic globalization, China has opened wider to the outside world, attracted and utilized foreign investment, introduced advanced technology, transformed and upgraded domestic industries, and achieved rapid development in foreign trade through all-round participation in the international division of labor and competition.
As the statistics indicated: in 1978, the total value of China’s import and export was only 20.6 billion U.S. dollars, ranking 32nd in world trade and accounting for less than 1 percent of the world’s total; while in 2010, the total value of China’s import and export reached 2.974 trillion U.S. dollars, 144 times as much as that in 1978, with an annual average growth of 16.8 percent.
Of them, in 2010 the total value of China’s export was 1.5778 trillion U.S. dollars, showing a 17.2 percent annual growth on average, and the total value of import reached 1.3962 trillion U.S. dollars, representing an annual average growth of 16.4 percent.
In 2010, the total volumes of China’s export and import accounted for 10.4 percent and 9.1 percent of the total around the whole world, respectively. By the end of 2010 China had been the world’s largest exporter and second-largest importer for two consecutive years.
Besides, China has formed an all-round and diversified import and export market. Since the adoption of the reform and opening up policy, China has been promoting foreign trade on all fronts, and established trade relations with the vast majority of the world’s countries and regions. China’s trade partners have increased from a small number of countries and regions in 1978 to 231 countries and regions now. The European Union (EU), the United States, the Association of Southeast Asian Nations (ASEAN), Japan, and the other BRIC countries have become China’s major trade partners.
In this new century, China’s trade with newly emerging markets and developing countries has maintained sustained and relatively rapid growth. From 2005 to 2010, in China’s total trade in goods the proportion of trade with ASEAN increased from 9.2 percent to 9.8 percent, with other BRIC countries from 4.9 percent to 6.9 percent, with Latin America from 3.5 percent to 6.2 percent, and with Africa from 2.8 percent to 4.3 percent.
However, China remains a developing country. Compared with other world trade powers, China’s export industry remains at the low end of the global industrial chain. China’s resource and energy inputs and environmental cost are relatively high, while the international competitiveness of enterprises and the risk-resistance of some industries are relatively weak.
During the negotiations over the restoration of its GATT (General Agreement on Tariffs and Trade) membership and entry into the WTO, and after it became a WTO member, China gradually adopted international trade practices, and established a unified, open foreign trade system compatible with multilateral trade rules.
On December 11, 2001, China became the 143rd member country of the World Trade Organization after 16 years of negotiations. To honor its commitments upon entry into the WTO, China expanded its opening-up in the fields of industry, agriculture and the services trade, and accelerated trade and investment facilitation and liberalization.
Meanwhile, the government deepened the reform of its foreign trade system, improved its foreign trade legal system, reduced trade barriers and administrative intervention, rationalized government responsibilities in foreign trade administration, made government behavior more open, more impartial and more transparent, and promoted the development of an open economy to a new stage.
By 2010, all of China’s commitments made upon entry into the WTO had been fulfilled. China’s earnest efforts are commended by the majority of the WTO members. The Chinese government received three trade policy reviews from the WTO in 2006, 2008 and 2010, respectively. The WTO’s basic principles, such as non-discrimination, transparency and fair competition, have been included in China’s laws, regulations and related systems.
China’s foreign trade and the world economy
“China’s reform and opening up and its active participation in economic globalization have made the country one of the world’s fastest-growing economies,” said the report.
Over the past 10 years, China, along with other emerging economies, has become an increasingly important force propelling world economic growth.
According to the World Bank, from 2001 to 2010, China’s GDP increased by 4.6 trillion U.S. dollars, representing 14.7 percent of the increase in the world aggregate, and the share of China’s GDP in the world rose to 9.3 percent over the same period.
Data from the WTO shows that from 2000 to 2009, the average annual growth rates of China’s exports and imports were 17 percent and 15 percent, respectively, much higher than the 3 percent annual growth rate of world trade.
During the international financial crisis, China’s foreign trade was among the first to stabilize, promoting the recovery of the world economy. In 2009, global imports decreased by 12.8 percent, while China’s goods imports increased by 2.9 percent, making it the only country to maintain growth among the world’s largest economies.
During its third review of China’s trade policy, the WTO pointed out that China had played a constructive role in stimulating global demand during the international financial crisis, and had thus made significant contributions to the stability of the world economy.
Besides, the development of China’s foreign trade has provided a broad market for its trading partners. Since 2001, China’s import has increased by approximately five times, representing an annual growth rate of around 20 percent. China’s rapidly expanding imports have become a major driving force for global economic growth, creating an enormous market for its trading partners to augment their exports. At present, China is the largest export market for Japan, Republic of Korea, Australia, ASEAN, Brazil and South Africa, the second largest for the EU, and the third largest for the US and India.
Meanwhile, China is one of the developing countries granting the biggest market access to the least-developed countries (LDCs). By July 2010, China had granted zero-tariff treatment to over 4,700 commodities from 36 LDCs which had established diplomatic ties with China. The zero-tariff commodities accounted for 60 percent of the total imports from those countries.
China has promised to continue expanding its preferential treatment to the LDCs having diplomatic ties with China until the zero-tariff commodities reach 97 percent of the total imports from those countries. The zero-tariff measure has helped increase the exports of LDCs to China. Since 2008, China has been the largest export market for LDCs. In 2010, China’s import from LDCs accounted for approximately one quarter of those countries’ total exports, an increase of 58 percent over the previous year.
Furthermore, China has participated in and helped push forward the reform of the global economic governance mechanism. The Chinese government actively advocates a “balanced, inclusive and mutually beneficial” multilateral trade system, and strives to establish a fair and equitable new international economic and trade order.
Balance of foreign trade
“It is the country’s different level and status of participation in the international division of labor in manufacturing and the services industry that leads to China’s big surplus in goods trade but a long-term deficit in services trade,” said the paper.
After 1990, with large-scale industrial outsourcing and relocation, China enhanced its competitiveness in manufactured goods. Growth in exports overtook that of imports, turning the overall deficit to a surplus in trade in goods.
In 2005 China’s surplus in trade in goods reached 100 billion U.S. dollars for the first time, which was followed by vigorous growth for four consecutive years. In 2008 the surplus hit 298.1 billion U.S. dollars, the highest point in history, before slowing down gradually.
The surpluses in trade in goods for 2009 and 2010 were 195.7 billion U.S. dollars and 181.6 billion U.S. dollars, down 34.4 percent and 7.2 percent year-on-year respectively.
In 2010, China’s surplus in trade in goods accounted for 6.1 percent of the total import and export volume, and 3.1 percent of the GDP. Of the nine nations with the largest trade balances (favorable or unfavorable), China was not high up in the league table in terms of the two ratios.
While China is currently enjoying a surplus in trade in goods primarily with the United States and Europe, it also has long-term trade deficits with Japan, Republic of Korea, ASEAN and other major intermediate producers: in 2010 China’s surpluses in trade in goods with the United States and the European Union were 181.3 billion U.S. dollars and 142.8 billion U.S. dollars, respectively, and its total deficit in trade in goods with Japan, Republic of Korea and ASEAN was 141.6 billion U.S. dollars. The deficit in trade in goods between China’s mainland and Taiwan reached 86 billion U.S. dollars.
China’s surplus in trade in goods mainly comes from the foreign-invested enterprises and processing trade. Since the adoption of the reform and opening up policy in 1978, China has experienced rapid growth in attraction of foreign direct investment: the import and export business of foreign-invested enterprises and processing trade mainly operated by foreign-invested enterprises accounted for about 50 percent of China’s trade volume in goods, and were also the major source of the country’s surplus in trade in goods.
In 2009 and 2010 the surplus in trade in goods created by foreign-invested enterprises reached 127 billion U.S. dollars and 124.3 billion U.S. dollars, respectively, accounting for 64.8 percent and 68.4percent of the total surplus of China’s trade in goods in the two years.
Processing trade surplus of foreign-invested enterprises in the same period hit 264.6 billion U.S. dollars and 322.9 billion U.S. dollars, significantly higher than the country’s total trade surplus for 2009 and 2010. While foreign-invested enterprises and processing trade enjoyed a big favorable trade balance, the import and export of China’s state-owned enterprises, general trade and other forms of trade were in deficit.
As China turned its trade deficit into a surplus, the country improved its international balance of payments and enhanced its resistance to external risks. However, the sharp increase in surplus also created trouble for the Chinese economy. The large volume of RMB input in export settlement complicates macroeconomic control, and the rapid expansion of China’s surplus in trade in goods also results in more trade frictions between China and its trading partners, as well as persistent pressure on the RMB to appreciate.
The Chinese government attaches great importance to the imbalance in the development of foreign trade, and has adopted a series of policies and measures to curb overheated surplus growth, which have achieved obvious effects. The nation’s surplus in trade in goods has been on a steady decline since 2009, and the proportion of surplus in the total import and export trade volume and the GDP also started to drop in 2008, moving toward a balance in foreign trade.
Besides, China also stresses all-round development in its foreign trade. China adheres to developing economic and trade partnerships based on practical cooperation and mutual benefit with all countries: China enjoys a steady growth in its trade with developed countries, and realizes complementary advantages as well as reciprocity and mutual benefit; the trade with emerging economies and developing countries is experiencing robust growth, with huge development potential; the government attaches great importance to the institutional set-up of bilateral and regional economic and trade cooperation; China would take proactive initiatives to participate in and promote regional economic integration; China has actively participated in and promoted the World Trade Organization’s Doha Round talks, and strives to safeguard the authority of the multilateral trading system; and in settling disputes with its trading partners, China gives consideration to the interests of all parties, and seeks common ground while shelving differences.
Sustainable development
At present, unbalanced, inconsistent and unsustainable development factors persist in China’s foreign trade: the export growth mainly relies on the input and consumption of resources, energy, land, manpower, environment, etc., while the input of science and technology, management, innovation and other factors are insufficient, resulting in an ever more conspicuous contradiction between foreign trade development and the constraint on resource supply and environmental carrying capacity; enterprises are not competitive enough in R&D, design, marketing and services, and products with their own intellectual property rights and with their own brands account for only a small proportion of the exports; the contribution of foreign trade to China’s primary, secondary and tertiary industries is unbalanced; central and western China falls behind other regions in the scale and level of foreign trade; and foreign trade needs improvement in terms of the quality of its products and profits.
Chinese government has taken active measures to accelerate the change of the development pattern of foreign trade, and achieve sustainable development.
“In recent years, with the rising labor cost and spiraling prices of resources, energy and other production factors, the low-cost advantage of export-oriented industries has been greatly weakened. In the face of these new conditions, the Chinese government has set the strategic goal of turning the mode of foreign trade from extensive to intensive development,” said the report.
Moreover, Chinese government would insist on promoting energy conservation and emission reduction in foreign trade development. As early as in 1994, the Chinese government published China’s Agenda 21 - White Paper on China’s Population, Environment and Development in the 21st Century, setting goals on energy conservation and emission reduction for national economic and social development. In both the 11th and 12th five-year plans, the government made the reduction of energy consumption and CO2 emission intensity two obligatory targets. China will try to readjust its economic and industrial structure, accelerate the application of advanced energy-conserving and environmental technologies, and promote more balanced development between foreign trade and resource conservation and environmental protection.
According to the report, the government also would strengthen the trade-related intellectual property protection, enhancing the quality and safety requirements of export products, raise the import and export enterprises’ sense of social responsibility, and promote the international cooperation in emerging industries of strategic importance.
Recently, the underlying impact of the international financial crisis, the protracted, arduous and complicated nature of the world economic recovery is manifesting itself, and the global economic structure and trade layout face in-depth readjustment. China will make new adjustments to its foreign trade, in an effort to turn foreign trade from scale expansion to quality and profit improvement, and from mainly relying on its low-cost advantage to enhancing its comprehensive competitive edge, thereby turning China from a big trading country to a strong trading power.
China’s foreign trade is still hampered by many uncertainties and is bound to meet new difficulties and challenges. During the 12th Five-year Plan period China will open itself wider to the outside world as a driver for further reform, development and innovation, make full use of its advantages, strengthen international cooperation in all respects, and integrate itself into the world economy on a wider scale and at a higher level. China is willing to work with its trading partners to cope with the various challenges facing the world economy and trade, and promote its foreign trade to realize a more balanced, coordinated and sustainable development, and share prosperity and mutually-beneficial results with its trading partners.
