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The following years will be the critical years for the Chinese government to fulfill its commitments and an important stage for marketization. Taking advantage of the accession to the WTO, China is sure to step up its marketization pace for foreign trade and enhance the degree of marketization in foreign trade.
(Ⅰ) Diversification of Operational Entities in China' s Foreign Trade
The common practice worldwide is that, when an enterprise is legally registered, it will obtain the import-export power as well as the right of domestic trade. To open the power to engage in foreign trade as committed and to diversify the operational entities of foreign trade are a must to keep our word to the other countries and the only way to realize the market economy. In the following years, China will go on its way to promote the transformation towards the thorough registration system for power to engage in import mad export and is expected to reach this goal within the three-year transition period. In details, all enterprises that are engaged in self-operated import and export of commodities o1 technologies (excluding those restricted by the State under the operation by designated companies) shall not be confined by other qualification requirements beyond those for establishment in laws and rules. The present foreign trade system dominated by solely state-owned companies will gradually transit to a comprehensive one with state-owned, foreign invested, incorporated, collective and private businesses participating in. The import and export, and distribution activities like wholesale and retail will be never ever so tightly related.
(Ⅱ) Trend of Liberalization of China' s Commodities Trade and Trade in Services
China is likely to lower its tariffs further. China will voluntarily reduce the average tariff to 10 percent by 2005. Such being the ease, 2003 will see more reduction of import tariffs, with. the arithmetic mean of tariffs dropping down from 12 percent to 11 percent. The average tariff of agricultural products will go from 18.1 percent to 16.8 percent, down by 7.2 percent; the average tariff of industrial products will drop by 9.6 percent from 11.4 percent to 10.3 percent, among which, by July 1, 2006, the average tariff of automobiles will touch 25 percent and that of components will be down to 10 percent.
In accordance with the WTO accession documents, China is allowed to designate specific dealers to operate and manage eight items of bulk products concerning the national economy and the people's livelihood, namely, crude oil, product oils, chemical fertilizers, cereals, cotton, sugar, vegetable oil and tobacco. In addition, the percentages of non-designated operation items have been specified based on the present situation of import in China. (Here, the non-designated operation items refer to goods imported not for general trading purposes but for businesses such as export processing and are not subject to handling by designated companies). The number of enterprises designated to deal in the aforementioned commodities will increase year by year. After the three-year transition period from 2002, these protection measures will be eliminated. State-operated trade will not be taken as the major measure of China to control import and export.
According to the guidelines in the WTO rules on revoking quantity restrictions, within the five-year transition period, China will gradually loosen until abolish the restrictions on quotas, licenses and specific bidding. Also in this point, China has made commitment on the quotas of 24 types of products in the base period mad the yearly increase rates for the transition period. By 2003, the import quotas will be removed from 31 types of commodities including motors and cameras; specific import restrictions on 19 commodities including vessels will be nullified; the increase rate of import quota of product oils, natural rubbers, tires and some other products will reach 15 percent. By 2004, China will abrogate the import quantity restrictions on product oils, automobile tires and natural rubbers. By 2005, all machinery and electrical products will be relieved of import quantity restrictions. To that year, five agricultural products including cereals (such as wheat, rice and corn), cotton, vegetable oil, sugar and wool, together with the chemical fertilizers, will be changed from absolute quota control to tariff quota control.
For being a member of the WTO, China has made the following commitment for opening the trade in services: foreign service providers have the right to freely select Chinese partners, including the partners from other lines; no quantity restrictions on the major sensitive service lines of China against foreign investment; in qualification examination, providing up to the doctrine of due diligence, the foreign projects shall be approved; it is not allowed to keep foreign investments from the service lines with the excuse of avoiding repeated construction or needing experimental runs. Foreign investors are permitted to access to the service lines of China, such as banking, insurance, distribution, telecom, transportation, law consultation and accounting. In respect of the telecom services, China will perform the WTO Basic Telecom Agreement to change the transition period for abolishing the regional restrictions on paging and value added telecom services, mobile communication services and domestic online services respectively to 3, 5 and 6 years, but the foreign invested shares, management and control power and international communications gateways will be still under the control of the State. As for banking services, China will observe the Agreement on Financial Services, and, as committed, will gradually remove die restrictions on customers and regions against foreign investors to engage in foreign exchange and RMB services within 5 years. In the point of insurance, within five years after its accession to the WTO, China will eliminate the restrictions on business scope and region against foreign insurance companies, and the proportion of foreign shares in China Life Insurance Company shall not exceed 50 percent. For securities, foreign investors are allowed to buy shares from securities fund management companies under the premise that such companies shall be controlled by the CPC. They are only permitted to deal in underwriting of A Share, underwriting, sell-operated trading and brokerage of B Share, H Share, treasury bonds and debentures of any domestic or overseas government or company, other than trading in A Share. Distribution involves trading, wholesale, retail, maintenance, transportation, storage and other auxiliary services. China will relieve foreign invested enterprises of restrictions on share structure, business scope, quantity and region step by step within three years with the exception of a few commodities. After 5 years, except for salt and tobacco, foreign investors will be allowed to deal in almost all industrial products. The value added telecom and paging lines are allowed to absorb 50 percent foreign investments two years after China' s entry into the WTO); no restriction against foreign banks in terms of national treatment, apart from those on regions and customers; as far as Internet and satellite services are concerned, commitments are respectively made in line with the value added telecom and basic telecom services.
With respect to retail and distribution services in the year of 2003, the government approves to set up a certain amount of foreign invested enterprises in the designated cities, allows foreign investors to take majority of shares therein, and approves these enterprises to take up retail of newspapers, magazines and books; as for finance, the renminbi services will be opened up gradually; apart from the cities committed to open, namely, Shanghai, Shenzhen, Tianjin, Dalian, Guangzhou, Zhuhai, Nanjing and Wuhan, another four cities will be opened, such as Jinan, Fuzhou, Chengdu and Chongqing; where foreign financial institutions are allowed to provide standard money services to Chinese enterprises ; foreign non-life companies are allowed to set up their solely foreign-funded subsidiaries, without restrictions on the forms of subsidiaries.
(Ⅲ) Unified, Standard and Transparent Policies on Foreign Trade
The Foreign Trade Law of the People' s Republic of China promulgated by the National People's Congress in 1994 specifies the principle of unified foreign trade policies. Now that China is prepared to amend the principle therein to unify trade policies within the customs territory, it will continuously standardize its trade policies until policies for the power to engage in trade for foreign investments and domestic capitals are unified; regulations on state-operated trade in conformity with the WTO rules will be drawn up, standardized pricing system for state-run trade products and a system for enterprise qualification recognition will be established to promote transformation of state-run foreign trade enterprises ; regulations concerning the percentage, quantity and prerequisites for non-state-run trading enterprises to deal with products of state-operated trade will be formulated; supporting systems for foreign economy and trade that are focused on export credit and guarantee of export credit will be improved; reforms will be conducted in respect of the import license procedure and the systems for releasing import quotas and designated operation ; export formalities will be simplified, and the import and export registration system for serf-operated producers and the approval system for foreign trade circulation enterprises will be implemented, efforts will be made to accelerate the pace to establish a new foreign trade and economy system adapting to the multilateral trade mechanism mad regulations and with full consideration to the present situation of China. In a word, China will honor its commitment to the WTO in respect of enhancing the transparency by way of polishing the related regulations.
(Ⅳ) Legislation and Marketization of Foreign Trade Administration
The WTO rules are devised on the basis of market economy, which is usually a law-based economy. Now that China has been incorporated into the WTO family, it will go on its way to consolidate the legal system to support its foreign trade and economy and improve its ability to administrate foreign economy according to law; more work will be done in respect of arranging, amending mad formulating laws on foreign economy, especially the legislation on trade in services and intellectual property rights; the supervision and inspection over law enforcement on the management of foreign economy will be tightened up, the majesty of law is to be maintained by eliminating and rectifying the non-enforcement or partial enforcement of law in practices in order to minimize the occurrence of administrative controversies and trade disputes. Meanwhile, China will continuously adapt its foreign trade administration to the market economy, improve the system on duty drawback as well as other systems on trade and services like finance and export insurance, propel the reforms in the Renminbi settlement, sale and payment system, expand the range of convertibility of Renminbi under the current account, consummate the formation mechanism of Renminbi exchange rates, and enhance the level and ability in administrating foreign trade by market-oriented means.
(China.org.cn November 7, 2003)
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