China Bans More Processing Trade

♠ Posted by Emmanuel in , at 4/08/2007 02:47:00 AM
China is banning yet more items involved in the processing trade, in which manufacturers in the country add value and then re-export. This move is related to China's efforts in moving up the value-added ladder while simultaneously addressing its widely noted problems with resource-intensity and pollution from heavy industry. While China has had a list of prohibited exports from the processing trade since 2004, it seems that it is only seeing results as of late. I previously mentioned China's efforts to move away from giving export-tax rebates to products from such industries, especially as America's case against China (DS 358) pertaining to export subsidies is about to reach the adjudication stage in the WTO. These are tentative signs that China is backing down:

China will ban processing trade in more categories of chemical and resource products in the latest move to restrict the export of resource-intensive products and to balance trade.

The 2007 Prohibited List for Processing Trade, which will take effect on April 26, bans processing trade firms from dealing in 990 products.

There are 186 new categories listed, including heavy diesel oil, apatite and lanthanon ore. They are mostly non-renewable resources, energy-consuming and high-polluting products.

Most of the newly added products fall within the categories for which export tax rebates were scrapped or lowered, according to an official with the Ministry of Commerce who did not wish to be named...

The government's moves to control processing trade have had a preliminary impact this year, according to Customs. The processing sector's imports and exports accounted for 45.4 percent of the country's total trade in the first two months this year, down 2.8 percentage points from a year ago.

But the processing trade surplus still amounted to $34.57 billion in this period, while the total trade surplus was $39.64 billion.

Apart from controlling processing trade, the Chinese government is also reportedly preparing to cut or scrap export tax rebates on extra categories such as high-purity refined zinc, garments and more iron and steel products.