At a recent press briefing held by the Ministry of Commerce (MOFCOM), it was revealed that through lowering and lifting tariffs on a reciprocal basis and further liberalising the services and investment sectors, a win-win situation has been achieved between China and the trading partners concerned. For example, under the China-ASEAN Free Trade Agreement (FTA), starting from 1 January this year, over 60% of the products from both sides can enjoy zero tariffs in bilateral trade. By 2010, over 90% of the products from both sides will be entitled to zero tariffs. 

Trade under seven FTAs totals US$500 billion

In the government work report released at the recent NPC session, the "strategy of expediting the implementation of free trade agreements" was once again given emphasis. At present, China is involved in the negotiation, signing and joint study of 14 FTAs with 31 countries and regions. Among these, seven FTAs have already become effective, including the Closer Economic Partnership Arrangement (CEPA) with Hong Kong and Macau respectively, and the FTAs with ASEAN, Chile, Pakistan, New Zealand and Singapore. Trade under these seven FTAs accounted for about 20% of China's total foreign trade in 2008, with a combined amount reaching US$500 billion. 

Exports drop four months consecutively

Exports in February this year dropped 25.7%. The accumulated export decline for January and February reached 21.1%, falling four months in a row. Reportedly, the major reason for export drop is the dwindling demand of the international market. An international organisation estimated that global trade will decrease by about 2% this year.

Since Chinese products (especially export products produced by private enterprises in provinces such as Zhejiang and Fujian) are mostly medium-range consumer goods, they still have much room for expansion on the international market and their competitiveness is relatively strong. Currently, the decline in the export of mechanical and electronic products is sharper than labour-intensive products. As mechanical and electronic products account for 60% of China's export products, the steep drop in the export of mechanical and electronic products has directly impacted the fall in overall exports. The reasons for the drop in mechanical and electronic products export are financing problem and changes in processing trade policy. 

However, the situation is improving. Examples include: first, the shift of the "actual payment" of processing trade customs duty deposit to "nominal payment" has greatly reduced the financial burden of enterprises. Second, further cuts in the number of products under the restricted category in processing trade - from over 2,400 to 500 - have helped. Third, the relevant departments are proactively implementing measures for the domestic sale of processing trade products, these include studying the facilitation of domestic sale, lowering the interest rate for capital in payment of tax on domestic sale, and further promoting processing trade. 

Where exports recovery is concerned, as the impacts of the financial crisis are deepening, it is probably still too early to say that exports are reviving. However, there are positive factors, such as certain labour-intensive products do have a competitive edge, policies supporting the export of mechanical and electronic products are gradually becoming effective, and policies have been introduced to maintain the steady development of foreign trade. 

Progress of China's FTA negotiation work

Asia: signed CEPA and its five supplements with Hong Kong and Macau; signed Agreement on Trade in Goods and Agreement on Trade in Services with ASEAN, and has concluded negotiations on investment; signed Free Trade Agreement and Agreement on Trade in Services with Pakistan; signed Free Trade Agreement with Singapore; in the process of negotiating free trade agreement with the Gulf Cooperation Council (including Saudi Arabia, Kuwait, UAE, Oman, Qatar and Bahrain). 

Latin America: signed Free Trade Agreement and Agreement on Trade in Services with Chile, and in the process of negotiating investment; concluded free trade agreement negotiations with Peru; in the process of negotiating free trade agreement with Costa Rica. 

South Pacific: signed Free Trade Agreement with New Zealand; in the process of negotiating free trade agreement with Australia. 

Europe: in the process of negotiating free trade agreement with Iceland and Norway. 

Africa: kicked off negotiation on free trade agreement with the Southern African Customs Union.