China Releases Guidelines on Innovative Development of Processing Trade

China's State Council issued the Several Opinions on Promoting Innovative Development of Processing Trade on 18 January 2016.

The Opinions were drawn up against a backdrop of significant changes in the international environment and domestic conditions for processing trade development by 16 ministries and government departments including the Ministry of Commerce (MOFCOM), National Development and Reform Commission and Ministry of Finance to promote innovative development of processing trade.

According to MOFCOM, China has to seize the opportunity arising from changes in the global manufacturing chains, accelerate the promotion of innovative development of processing trade, and enhance China’s position in the global value chain.

The Opinions put forward five directions in the processing trade development and upgrading:

First, to enhance the technology content and value-added element of the products, shifting from low end to high end.

Second, to extend the industry chain, integrating manufacturing with trade in services.

Third, to enhance the strength of business entities, transforming from processing and assembly factories to companies leveraging technology, branding and marketing.

Fourth, to optimise regional distribution of processing activities, gradually realising the coordinated development of eastern, central and western regions and rational distribution domestically and abroad.

Fifth, to shift the momentum of growth, from mainly factor-driven to combination of factor-driven and innovation-driven.

The Opinions are divided into eight parts. Painting a clear picture of the innovative development goals of processing trade by 2020, the first part sets out the general requirements in five basic principles. These are: seeking progress steadily, steadfastly promoting transformation and upgrading, innovation as growth driver, reasonable co-ordination of development domestically and overseas, and constantly improving the business environment.

The second to the fifth parts spell out the main tasks of innovation and development in processing trade, including: extend the industry chain to improve the position of processing trade in the global value chain; give play to the demonstration and leading role of coastal regions to promote transformation and upgrading and advance quality and efficiency; support interior or border areas to undertake industrial transfer to drive coordinated development of regions; and guide enterprises in carrying out international production capacity cooperation in an orderly manner and make overall planning for markets and resources at home and abroad.

The sixth to eighth parts deal with the implementation requirements, including: reform and innovate management systems and enhance development momentum; and improve policy measures to optimise the development environment.

According to MOFCOM, the Opinions clearly mark out the pathway for innovative development of processing trade in the three situations, namely, stay put, bring in and move out. For enterprises staying put, the initiative is to expand and to extend. On the basis of encouraging processing trade enterprises to speed up transformation and upgrade, processing trade is to be expanded and extended and the manufacturing sector is to be transformed from producer into producer services by integration with trade in services, with the internet, and with smart manufacturing. For bringing in new capital, efforts will be made to continue to increase investment through attracting capital, talent and technology from overseas, as well as enhancing the level of utilisation of foreign investment in processing trade. For moving out, on the one hand, efforts will be made to accelerate the relocation of processing trade from coastal to interior and border regions, and to study and formulate differential policy to support the interior and border regions in undertaking processing trade. On the other hand, the focus is to guide orderly international production capacity cooperation of enterprises, giving play to the role of offshore cooperation zones as the platform.

For the full version of the Opinions in Chinese, please see:

http://www.gov.cn/zhengce/content/2016-01/18/content_5033735.htm