Chapter 2.3: The Deregulation of Foreign Trade within the WTO

Shi Yonghai, Chairman, China Association of International Trade (CAIT)

Eliminating the system of examination and approval of trading rights and applying the registration regime

As committed at the time of WTO accession , China will progressively lower the threshold for the availability of trading rights within the three-year transition period and eliminate its system of examination and approval of trading rights at the end of the transition period. All kinds of enterprises will have the right to trade upon registration.

During the transition period the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) will make further efforts to reform the foreign trade system and will do its best to complete the following three areas of work:

• First, steps will be taken to reduce progressively the qualification requirements for obtaining trading rights;

• Second, a registration system will be implemented for enterprises to qualify for trading rights;

• Third, the restrictions on the business scope of production enterprises will be eventually lifted.

According to the Protocol and the Report of the Working Party on the accession of China, the specific procedure will be:

• China will eliminate its system of examination and approval of trading rights within three years after accession;

• Upon accession, China will eliminate any export performance, trade balancing, foreign exchange balancing and prior experience requirements;

• China will reduce the minimum registered capital requirement for wholly Chinese-invested enterprises to obtain trading rights to 5,000,000 renminbi for year one, 3,000,000 renminbi for year two, 1,000,000 renminbi for year three and will eliminate the examination and approval system for trading rights at the end of the phase-in period;

• China will progressively liberalize the scope and availability of trading rights for foreign-invested enterprises. Such enterprises will be granted new or additional trading rights based on the following schedule: beginning one year after accession, joint- venture enterprises with minority share foreign- investment will be granted full rights to trade; and, beginning two years after accession, majority share foreign-investment joint- ventures will be granted full rights to trade.

At the same time, MOFTEC will carry out reforms on the modes of foreign trade administration in accordance with the principle of 'lenient examination and approval, strict administration and facilitation of development', shifting the focus of administration to macro- supervision and maintenance of market order. In order to effect such a transformation of government administration, MOFTEC will coordinate with other concerned government departments to amend the Foreign Trade Law of the People's Republic of China and draft the rules regarding registration of import and export trading rights. Meanwhile, technical means of registration will be improved to achieve online electronic registration eventually. Coordination and cooperation with other government departments will be strengthened and a uniform code of administration over import and export enterprises will be implemented. In this connection, all government departments will be electronically networked in order to establish a nationally unified network system for the surveillance and monitoring of import and export enterprises, which will also enable government departments to implement precautionary administration of those operating activities that have records of malpractice.

The deregulation of trading rights and the associated upsurge in the number of enterprises dealing in import and export have caused an urgent requirement for the government to transform the modes of administration and improve the level of administration. From now on, MOFTEC will shift its emphasis progressively from the administration of market access to macro-management in order to maintain market economy order and ensure that fairness, justice and order are maintained in competition.

^[*] This chapter was originally written in Chinese and was translated by Li Yong.