Accelerating Change in the Pattern of Foreign Trade Development

From: English Edition of Qiushi Journal Updated: 2011-09-20 10:56
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 Changing the pattern of economic development is an important strategic task introduced at the 17th National Party Congress. Speeding up the change in the pattern of foreign trade development is an inherent requirement for changing the pattern of economic development as well as a fundamental way to make foreign trade development more scientific.

 This is a key period for China’s foreign trade as efforts are being accelerated to change its pattern of development.

 On the face of it, the impact of the current international financial crisis was a weakening in the growth rate of China’s foreign trade, but it actually promoted change in the pattern of foreign trade development. In speeding up this process we should keep in mind efforts to change the pattern of economic development, the need to make foreign trade development more scientific and the need to make China a strong foreign trade country.

 The pattern of foreign trade development needs to be transformed so that foreign trade is more responsive to changes in the national economy. Foreign trade is an important component of the national economy. In theory, the pattern of economic development determines the pattern of foreign trade development, and changing the pattern of foreign trade development must be in line with efforts to change the pattern of economic development. In addition, changing the pattern of foreign trade development also plays a leading role in changing the pattern of economic development. There are still some areas in China’s foreign trade that are not in line with economic development. These can be described as “three highs and three lows.” One is the high degree of dependence on input of tangible factors and a low degree of dependence on the input of intangible factors. The international competitiveness of China’s foreign trade mainly depends on the input of tangible factors such as resources, energy, land, environment and labor. At the same time there is an insufficient domestic input of intangible factors such as science and technology, management and innovations. Two is the high contribution to the development of secondary industry and the low contribution to primary and tertiary industries. Exports of manufactured goods in 2008 accounted for 86.3% of the total export volume while exports of service products only accounted for 10.6%, 7.4 percentage points lower than the world average level and 9.8 percentage points lower than that of the United States. Three is the high contribution to the development of the developed eastern region and the low contribution to the less developed central and western regions. The gap in regional economic development is becoming more and more apparent in the development of open economies in different regions. Foreign trade carried out by the nine provinces and one city directly under the central government in the eastern region accounted for 90.5% of total foreign trade in 2008. In order to promote change in the pattern of economic development, we must change the pattern of foreign trade development to address this situation.

 The pattern of foreign trade development needs to be transformed to make China’s foreign trade automatically adjust to changes in world trade. China’s foreign trade has become an important force promoting increase in world trade. But while the impact of China’s foreign trade is gradually growing, certain issues in China’s foreign trade have attracted a great deal of attention. One is the marked increase in trade friction. Competition in export trade with the developed countries and developing countries has intensified, making China’s export trade a major target of trade protectionism. China dealt with 116 cases of trade friction in 2009 involving US$12.7 billion. China’s exports accounted for 9.6% of the world total but were subject to about 40% of the world’s anti-dumping charges and 75% of the world’s anti-subsidy charges. Two is a less comparative advantage in foreign trade. China is located at the lower end of the value chain in the international division of labor in international trade with a low proportion of domestic intellectual property rights, domestic brands, marketing channels and products with high technology content, high added value and high profit. Estimates indicate that the proportion of export products with domestic brands was under 10%. Three is the striking imbalance in trade. China’s 2009 trade surplus was US$196.07 billion. This long-term imbalance in trade is neither China’s policy choice nor is it conducive to sustained development of China’s foreign trade.

  A young girl takes a picture of the Barbie dolls on display at the Changchun stop of a world tour of collector Barbie dolls. The Barbie doll, a doll that is a great favorite among young girls, is now almost exclusively produced in China. Chinese enterprises, however, only receive a processing charge of US 35 cents for every Barbie doll produced while the American company that owns the brand makes a profit of nearly US 8 dollars per doll. / Photo by Xinhua reporter Xu Jiajun

 Becoming a strong foreign trade country is the strategic objective of China in developing foreign trade. China’s exports in 2009 ranked first and imports second in the world. China is already a big trader but not a strong one. International experience indicates that the most salient feature of a strong trade country is its strong ability to make good use of global resources and its strong ability to coordinate and compete in the four areas of government, industry, enterprises and the commodities. China lags behind strong trade countries in these four areas and urgently needs to address the situation. One, the competitiveness of export commodities needs to be strengthened and more efforts need to be made to change the pattern of development from simply increasing quantity to improving quality by nurturing a number of export products with domestic intellectual property rights, domestic brands and independent marketing channels that have a high-tech content, are high in added value and are highly profitable. Two, the international competitiveness of enterprises need to be raised by increasing efforts to change from competing over quantity and prices to competing over quality and brands and cultivating a number of transnational companies with a high degree of organization and strong international competitiveness. Three, the ability of industries to organize and coordinate needs to be strengthened and more efforts need to be made to change China’s status from merely accepting prices to actively determining prices by cultivating a number of commercial organizations and associations with international influence and prestige in their respective industries. Four, the ability of the government to participate in the formulation of international trade rules needs to be strengthened and more efforts need to be made to change from merely accepting existing rules to taking the initiative in helping to work out international rules.

 It is crucial that we accelerate efforts to change the pattern of foreign trade development.

 Changing the pattern of foreign trade development is a profound economic reform as well as a profound shift in ideological views. We need to take the Scientific Outlook on Development as the guide, further free our minds, improve the policy environment, and establish a working mechanism to speed up the change. 

 To further free our minds, we need to strengthen our understanding in four areas. One is our understanding of reform. We need to speed up reform of the systems of management, promotion and public service which hinder foreign trade development. Two is our understanding of opening up to the outside world. We need to continue to take into consideration both the domestic and international situations, strengthen our ability to take advantage of both domestic and international markets and resources and accurately assess shifts in the structure of global demand and the structure of global industries in order to expand the depth and width of foreign trade development. Three is our understanding of innovation. We need to take into consideration objective conditions, develop new ideas in work, and develop a new pattern of development, new systems and mechanisms to make foreign trade more sustainable. Four is our understanding of development. The problems emerging in development can only be resolved through development and by making changes in development and promoting development through changes. 

 We need to improve the policy environment. One, we need to improve fiscal and taxation policy to stabilize financial support for foreign trade focusing on supporting structural adjustment and the transformation and upgrading of foreign trade. We need to maintain continuity and stability in the policy on export tax rebates, improve the structure of tariffs and make good use of the role of tariffs in macroeconomic regulation. Two, we need to improve monetary policy to keep the exchange rate of the Renminbi basically stable. We need to expand the area and scale of trials in cross-border trade settlement in Renminbi, actively develop overseas Renminbi business and steadily carry out regionalization and internationalization of Renminbi. Three, we need to improve financial policies to support foreign trade development. We need to expand the scale of export credit insurance, increase the ratio of exports covered by export credit insurance, reduce the level of insurance premiums and expand the risk coverage in terms of countries and markets. Four, we need to improve trade policy to continuously reduce barriers to trade, promote multilateral and bilateral negotiations to establish free trade zones and carefully study the impact of global climate talks on the development of China’s foreign trade so we can work out how to proactively adjust relevant trade policies.

 We need to establish working mechanisms. We need to accelerate the development of four mechanisms. One is a mechanism for assessing improvement in the quality, performance, structure and resource utilization of foreign trade to guide scientific development of the foreign trade of each region. During the 12th Five-Year Plan period we plan to establish a mechanism for assessing improvement in the country’s foreign trade as a whole and for providing guidance by category. Two is a working and service mechanism for vertical links, horizontal cooperation and efficient coordination to strengthen specificity in formulating policy and balance in their implementation to improve public services and remove barriers to trade. Three is a mechanism for promoting foreign trade that has a rational division of labor, is well coordinated and operates very efficiently, with relatively perfect laws and regulations, a system of trade promotion and an improved promotion mechanism for small and medium-sized foreign trade enterprises. Four is a reply and coordination mechanism to ensure rapid and effective response and strong action to address trade frictions and improve China’s ability to address foreign trade frictions. 

 The focus in efforts to change the pattern of foreign trade development needs to be on seeking substantive results.

 Accelerating efforts to change the pattern of foreign trade development, consolidate China’s position as a big trade country and make China a strong foreign trade country is at once a battle to storm a heavily fortified position as well as a protracted war. We need to truly seek substantive results in changing the pattern of foreign trade development in accordance with the requirements of the Scientific Outlook on Development.

 We need to work to optimize the structure of trade by making improvements in four areas. In working to improve the structure of foreign trade we need not only to set our eyes on resolving the deep-rooted issues in foreign trade but, more importantly, we need to work to strengthen the development momentum to ensure sustained foreign trade development to develop foreign trade on the basis of an improved structure. We need to make improvements in four areas. One, the main structure needs to be improved by strengthening large enterprises and supporting the development of small and medium-sized enterprises. Two, the structure of commodities needs to be improved by stabilizing exports of traditionally strong sellers, expanding export of products with high added value, striving to find new export products with a competitive edge and ensuring adequate import volume of important resources and key technology and equipment and parts and components. Three, the market structure needs to be improved by consolidating traditional markets, opening up emerging markets and developing markets in neighboring countries. Four, we need to improve the methods and structure of trade by strengthening general trade, upgrading the processing trade and developing other kinds of trade.

 We need to actively promote balanced foreign trade development in six areas. We need not only to make good use of China’s existing comparative advantages but also to strengthen the country’s dynamic comparative advantages and create competitive advantages in new areas to strive for even, balanced and sustainable development of foreign trade. We need to actively promote balance in six areas. One is to balance development of exports and imports and promote balanced trade. Two is to balance development of trade in goods and services and improve economy of scale. Three is to balance foreign trade development and investment and foreign economic cooperation and make them more interactive. Four is to balance development of foreign trade and domestic trade and ensure that they effectively complement each other. Five is to balance development of the public and non-public sectors of the economy and give play to their respective advantages. Six is to balance development of the eastern region and the middle and western regions to promote development of all regions.

 We need to vigorously work to make new breakthroughs in our work and carry out eight major measures. Making innovations in our work model means carrying forward the main practices used to promote foreign trade development during implementation of the reform and opening up policy over the past 30-plus years as well as actively working to come up with new approaches to work that will help speed up efforts to transform our work model. Therefore, we need to make a major effort to carry out eight measures. One is to actively work to expand import volume. We need to stabilize the various import promotion policies and improve the import promotion system. We need to make import trade more convenient by screening out administrative measures regulating imports that are no longer appropriate. We need to make use of free trade zones, zero-tariff preferential policies and policies to promote trade and investment and strengthen ties with key countries. Two is to build business platforms. We need to build a number of state exhibition platforms with a high international profile and influence. We need to encourage the development of a number of e-business platforms that are strong in technology and have an excellent reputation. Finally, we need to establish a number of overseas trade centers that will encourage further development and have a high level of management. Three is to establish export bases. We need to establish a number of export bases relying on concentrated industrial zones, development zones, bonded areas and customs control zones. We need to speed up development of strategically important emerging industries to form new export growth areas. Four is to improve the quality of commodities. We need to expand the export volume of products with domestic intellectual property rights, domestic brands, domestic marketing channels, high technology content, high added value and high profitability and raise the added value of traditionally competitive export products. Five is to expand trade in emerging markets. We need to identify key regions and countries where we can expand trade, taking into consideration economic scale, population, consumer spending power and market environment. We need to make extensive efforts to open up markets in Latin America, Central and Eastern Europe, Southeast Asia and neighboring countries. We need to expand border trade and make policies that grant favorable treatment to border regions in terms of administrative jurisdiction and convenience in trade and follow a policy of settling accounts in Renminbi and granting export tax rebates. Six is to upgrade the processing trade. We need to encourage extension of the industrial chain in the processing trade to raise the overall added value in the industry. We need to promote transformation and upgrading of the processing trade. We need to encourage moving more of the processing trade to the central and western regions. Seven is to support development of the service trade. We need to actively work to attract international service business to expand the scale of outsourced services, nurture domestic brands for exported services and expand support for the export of software, culture and animation products. Eight is to carry out the strategy of “going global” to boost trade. We need to encourage strong enterprises to compete for contracts for foreign projects, invest in setting up factories abroad and establish overseas sales networks. We need to promote steady development of overseas economic and trade cooperation zones, actively promote cooperation in the development of overseas resources and make good use of the major role of preferential purchasing and preferential lending policies to support export of large-scale equipment installations and technology in promoting overall exports.

(From Qiushi, Chinese edition, No.16, 2010)


Note: Author: Vice Minister of the Ministry of Commerce of the People’s Republic of China

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