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New law to stimulate nation's foreign trade
By Lu Haoting (China Business Weekly)
Updated: 2004-07-12 14:31

Mr Zhang wishes he had more than two hands to do his work since the introduction of the nation's new Foreign Trade Law on July 1.

"Every day about 60 applicants come to register as foreign trade operators," said Zhang, a registrar at the Beijing Municipal Bureau of Commerce (BMBC).

The phone beside him never stops ringing from 8:30 am when he steps into the office, because "a lot of people call to inquire about registration procedures."

China's updated Foreign Trade Law is expected to encourage the nation's foreign trade, even though more efforts are still needed to better enforce the law, experts said.

A highlight of this law is to change foreign trade licensing system into registration.

A company may engage in foreign trade after it registers with the relevant government departments.

Even individuals are allowed to take part in the import and export of goods and technologies as "natural persons."

Trading companies previously had to obtain licences from government departments and meet official requirements before being awarded the licences.

This change implies a lowering of the threshold for foreign trade operators. A new breed of foreign trade enterprises may appear in the years to come.

"Allowing wider access to foreign trade is a general trend that complies with China's marketization and its integration into the global economy," said Li Yushi, deputy director of the Chinese Academy of International Trade and Economic Co-operation, a think-tank of the Ministry of Commerce.

"Limiting foreign trade rights to a few enterprises is typical of the planned economy era and impedes fair competition," Li said.

He said the further opening of foreign trade to individuals and small- and medium-sized enterprises will create new business opportunities and increase China's exports.

China ranks as the world's fourth-largest country in foreign trade with a total volume of US$851.2 billion last year. The nation's exports reached US$438.3 billion last year, a year-on-year increase of 34.6 per cent.

"But China is unlikely to see a sudden surge of individuals registered as 'natural persons' to do foreign trade because of the high risks and unlimited liability that individual operators must shoulder," Wang Zhenzhong, deputy director of the Chinese Academy of Social Sciences' Economy Research Institution, told China Business Weekly.

Also, the shift from licensing to registration does not mean everybody can conduct foreign trade, said an industry source.

"You still have to go through lots of procedures," the source said.

It takes five working days to get registered at the BMBC.

Enterprises and individuals must also register at industrial and commercial bureaux, customs and government departments responsible for taxation, forex management and quality inspection and quarantine.

"Very few individuals have come to register as 'natural persons' to conduct foreign trade since the new law took effect. Most are private enterprises who either wish to export their own products or become foreign traders," Zhang from the BMBC said

Some analysts are worried that the introduction of the new law means existing foreign trade companies in China may suffer from a "brain drain" -- experienced salespersons will leave and do business on their own, taking lucrative clients with them.

"But in the short run the market pattern is unlikely to change greatly," said a source with High Hope Int'l Group.

"Lots of individuals have already been very active in conducting foreign trade. They have their own clients and do business on their own. They just use a licensed foreign trade company's name in customs declarations and L/C (letter of credit). The company draws money from each deal. It is not surprising to see a colleague leave and a new one come in just to use our company's name," the source, who declined to be named, told China Business Weekly last week.

High Hope Int'l Group is one of the largest knitwear and home-textiles trading companies in East China's Jiangsu Province.

"Newly established small enterprises also need time to build up their own sales network, reputation and grasp of the latest international market information. We have the advantage in these areas," the source added.

But Wang said: "Those big firms, in order to keep their leading roles in the long run, still have to think of new marketing strategies, explore new markets and invest in new areas, such as building their own manufacturing bases and developing their own brands, rather than just doing trade."

Experts said a problem the government faces is how to regulate the business conduct of emerging individual foreign trade operators.

"More detailed regulations and powerful industry associations are needed to avoid possible malicious competition through cutting prices, which could result in more dumping cases against China," Li said.

China now suffers from more anti-dumping cases than any other country.

More than 600 anti-dumping charges have been imposed on Chinese products by foreign countries since 1979, affecting over US$10 billion worth of Chinese exports.

Moreover, with the increasing number of foreign trade operators and rising volume of trade, China also needs to "speed up its forex management reforms" to fulfil renminbi's full convertibility, Wang said.

There were only 14 foreign trade enterprises in China when the nation launched its reform and opening policy in 1979.

As the nation further reforms its foreign trade system, China now has nearly 120,000 Chinese enterprises with foreign trade rights.

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