State Council Takes Measures to Address Foreign Trade Deficiencies

The State Council Executive Meeting on 14 January decided to establish a national venture capital fund for the emerging industries, assist entrepreneurship innovation and industrial upgrade, make plans to accelerate the development of trade in services, and expand the scope for development through structural optimisation.

The meeting decided on four main tasks: First, expand the scale of foreign trade, with emphasis on trade in services, such as transportation, telecommunications, research and design, energy conservation and environmental protection, and give impetus to the export of cultural products and works of art. Second, optimise the structure of trade in services and increase the proportion of trade with high-tech content and high added value. Third, make innovation in the business mode and make use of big data, the Internet-of-Things and other new technologies to build a platform of new networks for trade in services. Fourth, expand opening to the outside world by opening up finance, education, culture, medical care and other service trades in an orderly manner.

According to the latest information released by the General Administration of Customs, China achieved a growth rate of 2.3% in foreign trade in 2014, failing to reach the target for three consecutive years. The State Council planned to accelerate the development of trade in services in the hope of boosting foreign trade growth and industrial upgrade. The development of trade in services is an inevitable requirement against the backdrop of China's economic restructuring strategy. Although China is a major trading country, its market share in trade in services is quite small and falls considerably behind the developed countries. This presents an opportunity as well as a challenge to the development of trade in services, especially the emerging trade in services.

The rapid takeoff of the emerging trade in services, such as computer and information services, insurance, finance and consultancy, will facilitate China's economic transformation and restructuring, formation of new economic growth areas and absorption of more high-calibre personnel. Compared with traditional manufacturing industries, the advantage of trade in services lies in its smaller demand for resources and greater demand for new technology innovation personnel, which will help create more jobs for university graduates and give greater scope to the role of educated people.

When the traditional labour-intensive industries no longer have a competitive edge, exerting great efforts to develop trade in services will facilitate the transformation and upgrade of the manufacturing sector and help bring about a change in the mode of development of foreign trade.

China is in an intermediary position of simple processing in the global manufacturing industry chain. It is a big exporter but not an export power because it does not possess the core technologies of the products it produces. The executive meeting proposed to develop the outsourcing of hi-tech and high value-added services and give encouragement to innovative small and medium-sized enterprises with special characteristics; make innovations in the mode of development and make use of big data, the Internet-of-Things and other new technologies to build a platform of new networks for trade in services so as to make up for the deficiencies in science and technology; and rely on technological innovation and market forces to improve the quality and promote the growth of trade in services, including technology and patents. Science and technology constitute the core of a country's competitiveness. In order to become a big country in global trade in services, China must first become a powerful country in technological and cultural innovations.

In addition to the strengthening of software building, the acceleration of the development of trade in services also requires hardware support and policy coordination. This executive meeting put forward the task of pushing forward reform and opening up the sectors of finance, education, culture and medicine in an orderly manner. In conjunction with the pilot project to replace business tax with VAT, the meeting proposed offering zero tax rate or tax exemption to the export of services, guiding service trade enterprises to make use of financial, insurance and other tools to expand the financing channels, and supporting enterprises to raise the efficiency of foreign exchange fund utilisation through the offshore retention of export revenues and other means.