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Over the last three decades, China has gone from being a minor player in global trade to being the world's largest trading economy. Nonetheless, despite its growing supremacy in world trade, it lacks the capacity and will to lead on a global scale. As a result, it has been unable to find its place in global trade politics. Alternatively, China occasionally violates international trading laws, such as its commitments to the World Trade Organization (WTO). China also functions like an already established player in the international trade by abiding by the status quo and putting much value on the interests of the country rather than on the entire stability and survival of its system (Chung 598). It has remained passive and reserved in the process of multilateral Doha, however, it continues to pursue an extensive bilateral trade policy with the country. China has a unique trade policy that has led to criticism from some quarters in the global markets. This paper carries out an analysis of China’s trade policy. It will discuss the key exports, trade agreements and the use of tariffs, quotas subsidies, and restrictions.
China’s Trade Policy
The economic growth of China slowed down between the years 2014 and 2017. During this period, it was considered that the Chinese economy had fallen into the category of a “New Normal Situation” which showed stable economic growth. The main driving force in the economy of China is its strong domestic demand, rising incomes as well as the availability and expansion of domestic credit. It is a situation that illustrates the Chinese trade policy that was enacted in 2011 in order to enhance the domestic consumption and enable it to drive the economic growth in the country. The Chinese trade policy has outlined various laws and regulations that impact its trading in the domestic and international markets (Chung 599).
With the establishment of a unique trade policy that regulates its exports, China has different export products to other countries around the globe. For instance, steel is the major export product in China. The production of steel in China has extensively grown at a higher rate than the growth of consumption of steel products in the local markets. This compelled China to become the leading steel exporter in the international markets. The U.S has claimed that China imposed various tax levels on various steel products exported to the global markets in a way that seems to promote the exportation of particular values of steel. Nevertheless, during the great recession of 2008, China adopted a new trade strategy of removing or reducing the export duties on several steel products in order to enhance the exportation of products during the great reduction in the international demand of steel products. China also eradicated the export duties on other finished and semi-finished steel products. Similarly, it increased or reinstated the value-added tax of the export rebates. Therefore, steel is one of the key exports in China (Chen 1550002).
The key exports of China are currently valued at more than $1.194 trillion. Its main export products include electrical and other machinery products such as medical, optical, steel and iron, textiles, apparel, and processing equipment. As a matter of fact, the leading industry in the production sector in China is electronics. It has been established that the amount of sales revenues in the IT and electronics industries in China is valued at more than $800 billion. Therefore, the electronics industry will continue to play a major role in the international trade involving China and other countries. The total sales revenues in the electronic industry have experienced tremendous growth over the past few years. It is approximated that the global growth of China will continue to increase with the high number of export products (Luo and Jun 1391).
The dominant export products in China continue to be the manufactured products. It accounts for more than 94% of the total export products in China. Therefore, the key export products in China include clothing and textile, telecommunication equipment and office machines.
Use of Tariffs, Quotas, Subsidies, and Restrictions
According to the trade policy of China, it charges the export taxes on particular products and applies bans or quotas on other products. Together with other appropriate departments in China, MOFCOM issues catalogs of products forbidden or restricted for export in China. Goods subject to the restrictions of exports might need export licenses. China issues the list of all the products that are subjected to interim and statutory export taxes annually. The exports that pay interim taxes might be subjected to the special export duties that are applied on a seasonal basis. China is considered as the leading export of particular products globally. Nevertheless, some of the export products are subjected to export taxes in China. For instance, between 2014 and 2016, there were certain essential changes pertaining to imposition of the export duties that were made. First, there was the removal of interim export duties on all the items that are included in the 91 tariff lines. These products included molybdenum, tungsten, steel articles, certain iron, and chemical elements. Nevertheless, the statutory export rates did not change for all the different items. In addition, the Chinese government also eliminated the 75% special export duty rates. Entitlement of the VAT rebates on the exported products in China is done by the exporters (Chung 598).
Before the accession of China to the WTO in 2011, it restricted its imports through high taxes and tariffs, quotas as well as other nontariff measures. The restrictions were also on the trading rights, for instance, the right of individuals to export or import goods. Nevertheless, currently, China has substantially reduced its tariff rates on numerous goods. It has also reduced the number of products that are subjected to the import quotas. It has also expanded the number of businesses in China with trading rights. There is also an expansion in the number of products that Chinese enterprises could import. It has also continued to implement the tariff reductions on the schedules, eliminating import quotas as well as broadening the trading rights for individuals and foreign investors. Nevertheless, China has not accepted to permit trading rights for particular industries (Chung 619).
Abiding by the China’s Protocol of Accession to the World Trade Organization, the state trading enterprises are the only organizations that have the right to import certain products such as sugar and petroleum. Besides, for products that are still subjected to the tariff-rate quotas in China such as fertilizers, vegetable oils, cotton, and grains, etc, it has reserved some parts of the in-quota imports for the trading enterprises owned by the government however the other fraction of the in-quota imports can be imported by the non-state traders. There are other instances in which the percentages of the in-quota imports available to the non-state traders usually increase per year for a particular period of time (Luo and Jun 1396).
The trade restrictions in China are also based on the distribution and importations of the copyright-intensive goods such as music, DVDs, theatrical films, journals, newspapers as well as books. This contravenes its distribution services commitments and trading rights. Nevertheless, China eradicated such restrictions in 2011 in order to abide by the ruling of the WTO after the United States successfully challenged the restriction policies. There are other new policies that were also revised by the Chinese government that is mainly associated with the restrictions on music, DVDs, journals, newspapers, and books. China never issued any restriction measures on the theatrical films, however, it sought for bilateral discussions. After signing Memorandum of Understanding (MOU) concerning the film associated with the ruling of WTO, there was increased access to the Chinese markets for the imported theatrical films. It also offered improved compensations for the producers of foreign films (Luo and Jun 1390).
Based on subsidies, China eliminated all the subsidies that were banned under the Article 3 of the World Trade Agreement on the Countervailing and Subsidies Measures. This included all the types of subsidies that are dependent on usage of domestic products over imported products. China has also dedicated itself that it would not provide any condition on the investment or import certifications on all the products regardless of whether they compete with the domestic or international suppliers (Luo and Jun 1397).
According to the trade policy of China, it allows it to enter into different forms of trade agreements. The government of China considers free trade agreements as the best platform to open up to international markets and enhance domestic reforms that would help it to integrate effectively into the international economy. Presently, China has 19 free trade agreements in progress with 14 free trade agreements that have already been signed and adopted (Luo and Jun 1393).
Currently, China has 19 FTAs under construction, among which 14 Agreements have been signed and implemented already. Despite the fact that China has signed many free trade agreements, they do not have preferential or supplementary concessions. For instance, the qualified suppliers of Australia and Taipei of China are permitted to develop wholly owned healthcare centers in particular regions of the Chinese mainland. In addition, the CEPA agreements between Macao and China, Hong Kong and mainland China, there many supplementary commitments that China has in order to enable Hong Kong to have the great share in the joint venture. The supplementary concessions of the CEPA agreements have been enhanced through the reduction of the minimum amount of capital that is needed to create a joint venture. It also abolished the local minimum demands in the joint ventures for other China’s provinces. The agreement also allowed the creation of wholly owned healthcare centers in Chong Ching and Shanghai Municipalities. In addition, the services of the free trade agreements with Macao, China, and Hong Kong that had negative lists of the commercial presence in the market as well as the positive lists of the supplementary commitments associated with the cross-border trade, it eradicated the demands of minimum investments for the Chinese citizens engaged in the joint-ventures (Luo and Jun 1394).
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Luo, Changyuan, and Jun Zhang. “China Trade Policy Review: A Political Economy Approach.” The World Economy, vol. 33, no. 11, 2010, pp. 1390–1413., doi:10.1111/j.1467-9701.2010.01322.x.
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