1、Chinas processing trade undergoing a rapid transformation Processing trade refers to the business activity of importing all or part of the raw and auxiliary materials, parts and components, accessories, and packaging materials from abroad in bond, and re-exporting the finished products after process
2、ing or assembly by enterprises within the mainland. It includes processing with supplied materials and processing with imported materials. Under processing with supplied materials, the imported materials and parts are supplied by the foreign party which is also responsible for selling the finished p
3、roducts. The business enterprise does not have to make foreign exchange payment for the imports and only charges the foreign party a processing fee. Under processing with imported materials, the business enterprise makes foreign exchange payment for the imported materials and parts and exports the f
4、inished products after processing. Since the processing trade policy was implemented in late 1970s, the processing trade in China has been developing in a sustained and rapid manner； the total volume of exports and imports in the form of processing trade increased from US$2.5 billion in 1981 to US$8
5、31.9billion in 2006, up by nearly 333 times, and its proportion in foreign trade increased from 5.7 percent to 48.6 percent. The Department of Mechanic, Electronic and Hi-Tech Industry of the Commerce Ministry of PRC stated that what was more satisfactory than an increase in quantity was that as the
6、 processing trade developed continually and rapidly, the transformation and upgrading of processing trade had been accelerated. More and more foreign-funded enterprises transferred their processing and manufacture with a higher technology level and a larger appreciation content to China； influenced
7、by the technology and management spillover effects in processing trade, more and more Chinese companies had speeded up their technology improvement and industrial upgrading. The industrial structure in processing trade has been continuously optimized. During the Tenth Five-Year Plan period, the expo
8、rt value realized in the processing trade of mechanic and electronic products amounted to US$928.2 billion, accounting for 70.7 percent of the total processing trade export value and 74.0% of the total export value for mechanic and electronic products； such an export value is 2.4 times more than tha
9、t in the Ninth Five-Year Plan period with an annual growth rate of 29 percent, which is 1.2 times the growth rate for Chinas processing trade export value during the same period of time. China has become the largest producer and exporter of mechanic and electronic products like mobile phones, home a
10、ppliances and laptops in the world. In 2005, 99.9 percent of the laptops manufactured in China, 99 percent of the color video projectors and the microcomputers manufactured in China, 98 percent of the plasma color TV sets manufactured in China, 97 percent of DVD players manufactured in China, and 96
11、 percent of the ships manufactured in China were exported in the form of processing trade. During the Tenth Five-Year Plan period, the export value realized through the processing trade of hi-tech product amounted to US$543.8 billion, accounting for 41.4 percent of the total processing trade export
12、value and 87 percent of the total export value for hi-tech products； such an export value is 4.5 times more than that in the Ninth Five-Year Plan period with an annual growth rate of 41 percent and 1.7 times the growth rate for Chinas total export value realized in the form of processing trade durin
13、g the same period. In 2006, the respective export values realized in the processing trade of mechanic and electronic products and hi-tech products amounted to US$391.32 billion and US$245.84 billion, the proportion of which in the total export value realized in the form of processing trade were resp
14、ectively 76.7 percent and 48.2 percent, up 1.6 percentage points and 1.4 percentage points year on year respectively. The regional distribution of processing trade has been somehow ameliorated. Firstly, the processing trade in the middle and western parts of China developed fast though it started ra
15、ther late there. In 2005, the total export value and total import value realized in the form of processing trade in the middle and western parts of China added up to US$14.95 billion, 1.6 times more than that in 2000 with an annual growth rate of 23 percent, a bit faster than the growth rate for Chi
16、nas processing trade as a whole. Secondly, the product structure of the processing trade in the middle and western parts of China has also been somehow ameliorated. In 2005, the export value realized in the processing trade of mechanic and electronic products in the middle and western parts of China
17、 was US$3.07 billion, 2.2 times more than that in 2000 with an annual growth rate of 26 percent, and the proportion of such an export value in the export value realized in the form of processing trade in the middle and western parts of China was 33 percent, 7 percentage points higher than in 2000. T
18、hirdly, the processing trade in coastal areas, in which the Pearl River Delta once seized an absolute proportion, is gradually developing in the Yangtze Delta and the Bohai Rim. In 2005, the processing trade in Guangdong Province accounted for 42.3 percent of the gross in China with a decrease of 10
19、.3 percentage points than in 2000； during the same period, the proportion seized by Jiangsu Province amounted to 21.3 percent of the gross in China with an increment of 11.3 percentage points and that seized by Shanghai amounted to 12 percent of the gross in China with an increment of 2 percentage p
20、oints. In 2006, there realized a respective export value of over US$1.7 billion through processing trade in Henan, Anhui and Hubei, three provinces in the middle and western parts of China； various provinces like Jiangxi, Sichuan, Hubei, Anhui and Yunnan saw a growth margin of over 65 percent for th
21、eir exports through processing trade. The industry chain of processing trade has been extending continuously. First of all, the carrying forward services for deep processing for the purpose of processing trade presents a trend of rapid development, its scale is getting increasingly larger and it occ
22、urs more and more frequently. In the second place, as the processing trade kept extending towards independent research and development along its industrial chain, more and more research and development centers have been built up. Till now, foreign companies have set up over 750 research and developm
23、ent centers in China； nearly 40 transnational corporations have established regional HQs in China. As introduced by personnel in charge in the Department of Mechanic, Electronic and Hi-Tech Industry, the Ministry of Finance, the National Development and Reform Commission, the Ministry of Commerce, t
24、he General Administration of Customs, and the State Administration of Taxation jointly issued the Circular on Adjusting the Tax Refund Rate of Some Export Commodities and Supplementing the Commodities Catalogue Prohibited form Processing Trade on September 15, 2006 so as to guide the transformation
25、and upgrading of processing trade in China； on November 3, 2006, the Ministry of Commerce, the General Administration of Customs and the State Environmental Protection Administration jointly published the 2006 82nd Announcement to get commercial products the tax refund for which were cancelled and c
26、ertain commodities processed at a low level that will result in a serious pollution and consume a large amount of resources and energy enlisted in the Catalogue of Prohibited Commodities in Processing Trade. In the Catalogue of Prohibited Commodities in Processing Trade issued this time, priority ha
27、s been given to commodities the tax refund for which were cancelled, which include 804 commodities belonging to various (ten-digit) tax item numbers and account for 6.5 percent of the total number of tax item numbers for export and import products. The import of 77 commodities is prohibited, and suc
28、h commodities are mainly those the import of which is prohibited in international pacts or that will produce serious pollutions when being processed, including tiger bones, ores, ore residuals, and fiber waste； the export of 503 commodities were prohibited, and such a group is mainly made up of prim
29、ary raw materials for deep processing like planks, sulfur, soil, and stone materials, and metal raw materials, but enterprises importing such commodities as raw materials for their processing trade will continue to enjoy the bonded treatment； both the export and import of 224 commodities were prohibited, and such commodities are mainly commodities processed at a low level, resulting in serious pollutions and consuming a large amount of resources and energy, like coal, pitch, flammable gases and pesticides.
