China on Monday announced a new policy that seeks to curb the development of process trade in labor-intensive industries, in a bid to reduce its ever rising trade surplus.

The new policy, to take effect on August 23, shall cover 1,853 products in plastics, furniture and textiles and other labor-intensive industries.

Under the new policy, enterprises engaged in the production of the affected products are required to have guarantee deposits in the Bank of China, the designated bank of China Customs, while registering their process trade contracts with the authorities, according to the statement jointly released by the Ministry of Commerce (MOC) and China Customs.

If these enterprises fail to implement such contracts, they would lose their deposits and interest to the customs house.

"We are striving to improve the development of China's processing trade in a bid to promote trade balance and reduce trade surplus," said Wei Jianguo, vice minister of the MOC.

According to the statement on the ministry's website, the move targets high polluting and high-energy-consuming industries in eastern regions of China.

These regions include Beijing, Tianjin, Shanghai, Liaoning, Hebei, Shandong, Jiangsu, Zhejiang, Fujian and Guangdong.

Enterprises in these regions which have not gained export rights as on July 23, 2007 shall not be allowed to engage in process trade involving the blacklisted products.

The new policy shall not affect enterprises in the western regions.

Customs data shows the nation's processing trade volume in the first six months rose 17.6 percent to 440.9 billion U.S. dollars, accounting for nearly half of the China''s imports and exports.

China has seen its processing trade volume jumping from 2.5 billion U.S. dollars in 1981 to 831.9 billion U.S. dollar in 2006.

Since 2003, the Chinese government has been trying to encourage transnational companies to shift their high-tech and high-value-added processing businesses and relevant research institutions to China to advance its industrial capabilities.

"We will continue to improve the categorization of processing industries and set stricter entry standards for enterprises engaged in the processing trade," said Wei.