China announces new restrictions on processing trade

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China announced a new policy on Monday seeking to curb the growth of processing trade in labor-intensive sectors, Beijing’s latest attempt to reduce the country’s soaring trade surplus.

Set to take effect August 23, 2007, the new regulations will restrict processing trade of 1,853 products in plastics, furniture and textiles and other labor-intensive industries.

According to a joint statement released by the Ministry of Commerce and China Customs, enterprises engaged in the production of the affected products are required under the new policy to have guarantee deposits in the Bank of China while registering their processing trade contracts with the authorities.

The new policy targets high polluting and energy consuming industries in China’s developed eastern regions, including Shanghai, Jiangsu, Zhejiang, Beijing, Tianjin, Liaoning, Hebei, Shandong, Fujian and Guangdong. The joint statement said that enterprises in these regions which have not gained export rights as of July 23, 2007 will not be allowed to engage in processing trade of the listed products.

These new regulations will not affect enterprises operating in the central and western regions.

The list of new commodities restricted from processing trade under the new regulation can be found here.