Nation to seek continuity, stability in its policies for processing trade

BEIJING - Exports will remain a major force in helping China maintain economic growth by creating jobs and stimulating domestic consumption, despite decelerating growth in overseas shipments and a gloomy outlook, said the Ministry of Commerce.

Zhang Ji, director-general of the ministry's Department of Mechanical, Electronic and High-tech Industry, told China Daily on Tuesday that the nation would aim for "continuity and stability" in its policies for the processing trades, which remain a significant part of China's foreign trade.

Processing trade involves taking imported parts, components and packaging materials, assembling them and re-exporting the finished product.

Though export growth declined in the second half of 2011 and prospects for the coming months are not positive, the "significance of China's foreign trade (in advancing the economy) will be prominent, probably in the next two to three decades or even longer," said Zhang.

The International Monetary Fund said in a report on Monday that China's economic expansion could slow to 8.25 percent this year, from the previously projected 9 percent, should Europe's debt crisis worsen.

Exports would be a significant drag on growth in the coming two years, the fund said.

The IMF also estimated that exports in January might have fallen 1.4 percent year-on-year. Official trade figures are scheduled for release on Friday.

But Zhang said that exports could still "indirectly" make a significant contribution to the nation's economic growth, even if export shipments actually contracted in the short term.

"We all know that investment, exports and domestic consumption are the three pillars of China's economic expansion, but what if we merely depend on investment and domestic consumption?

"Do you think we could still bet on another round of large-scale investment after the 4-trillion-yuan ($634 billion) stimulus package was wrapped up?" Zhang said.

"Foreign trade could for a long time still guarantee jobs and growing individual disposable income, which would translate into domestic consumption."

China's 12th Five-Year Plan (2011-15) noted that the nation remained committed to expanding domestic consumption as it sought to transform its economic development mode.

"We have to enhance the competitiveness of foreign trade companies to make sure more jobs can be created," said Jin Baisong, an expert at the Chinese Academy of International Trade and Economic Cooperation, a think tank of the ministry.

The processing trade is a significant part of China's foreign trade.

According to the General Administration of Customs, China's processing trade grew 12.7 percent last year to $1.3 trillion, accounting for 35.8 percent of the nation's foreign trade.

During a visit last week to Guangdong province, the nation's export powerhouse, Premier Wen Jiabao said China would pursue basically "stable" foreign trade policies.

He added that any adjustments should be more "encouraging than restrictive", as the global debt crisis was still spreading.

Zhang noted that the nation was encouraging processing trade companies in coastal regions to move up the industrial chain and shift their focus to high-end manufacturing, strategic emerging sectors and service activities such as research and development.

"We will facilitate the transfer of some industries to the central and western regions from the eastern part," he said.

In 2010, China designated the cities of Suzhou in Jiangsu province and Dongguan in Guangdong province as pilot cities for upgrading of the processing trade.

The two provinces have numerous processing trade companies.

China Daily