CHINA
Rhode Island has eyes on China
Economic Data
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Total GDP: $933.4 billion
Real GDP Growth: 7.8% (1998), 7.2% (1999 est.)
Per Capita GDP: $824 (1999)
Inflation: 2.0% (1998)
Unemployment Rate: 6.0% (1999)
Current Account Balance: $24.8 billion (1998 est.), $3.8 billion (1999 forecast)
Trade Balance : $48.8 billion (1998) fell to $8 billion after the first half of 1999.
Merchandise Exports (US$): $182.7 billion (f.o.b. 1997): electrical machinery, clothing, footwear, toys, mineral fuels, leather, plastics, and fabrics
Merchandise Imports (US$): $142.4 billion (c.i.f. 1997): mechanical appliances, electrical machinery, mineral fuels, plastics, iron and steel, fabrics, cotton and yarn
Major Export Markets: Japan, United States, European Union, South Korea, and Taiwan.
The Chinese economy has been slowing down of late – but there are indications that that could change. Chinese Premier Zhu Rongji has ordered provincial leaders to strengthen their efforts to stimulate the economy. The country is encouraging its citizens to spend more of their money, rather than save. The Chinese are savers. Traditionally, they save an average of 40 percent of their income.
To increase spending, the government has cut interest rates on savings accounts and started to promote consumer credit. Also, $7.2 billion in special bonds will be issued this year to help finance spending.
And there’s more.
In September, leaders of the United States and China will meet for the first time since the bombing of the Chinese Embassy in Belgrade. Leaders from both countries are hoping to get U.S. and Chinese relations back on solid ground, prior to signing any agreement on Beijing’s entry into the World Trade Organization later this year.
Rhode Island businesses will be watching the developments closely.
The Providence-based Manufacturing Jewelers & Silversmiths of America Inc., a trade association, has been advising U.S. officials in negotiations with members of the
Asian and Pacific Economic Cooperation group (APEC).
The group — attempting to broker agreements on a number of goods, including jewelry — includes nations such as Japan, China, Mexico, Canada, New Zealand, and Singapore.
At the Jewelers & Silversmiths’ urging, the United States is backing a proposal by
Thailand for all member nations to drop tariffs against jewelry and phase out non-tariff barriers, such as luxury taxes, that have similar effects.
If the nations agree to this it will open markets now closed to U.S. manufacturers.
The biggest market is China – which protects itself with heavy tariffs – where demand for jewelry is strong, officials say.
“If it succeeded in doing nothing else than opening up the Chinese market it would have a significant impact on our industry,” said Jewelers & Silversmiths Vice President Tom Viola, in an interview last year with the Providence Business News. “It’s a very strong (market). Jewelry is not simply seen as a commodity for adornment; it’s also a medium for exchange.”
But China, where only the central bank is licensed to sell gold, has shown little enthusiasm for giving up its protections, Viola said.
People’s Republic of China
Location: Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam.
Size: 3.7 million square miles, slightly smaller than the United States
Main Cities and towns: Beijing (capital), Shanghai, Tianjin, Guangzhou, Shenyang, Wuhan, Chengdu
Population: 1.2 billion (1998)
Languages: Mandarin (Official), many local dialects
Type of Government: Communist State
Chief of State: President, Jiang Zemin
Currency: Yuan (also called renminbi)
Exchange Rate: US$1 = 8.3 Yuan (August 3, 1999)
Economic and Political Conditions: The Chinese economy is slowing down. Chinese Premier, Zhu Rongji, has ordered provincial leaders to strengthen their efforts to stimulate the economy. Officials realize that traditional government spending will not be enough. China is encouraging its citizens to spend more instead of saving. The Chinese save an average of 40 percent of their income. To increase spending, the government has cut interest rates on saving accounts and started to promote consumer credit. Also, $7.2 billion dollars in special bonds will be issued this year to help finance spending.
Chinese officials are working hard to ease exchange restrictions in order to stimulate foreign investment. China is persistent in its efforts to enter the World Trade Organization (WTO). All members of the WTO receive the same tariff reductions and access to markets. They pledge to operate an open trading system while following an arbitration system established by the WTO. China and U.S. trade negotiations recently came to a halt as a result of lingering tension over the Chinese Embassy bombing in Belgrade.
Although entry into the Chinese market may be easier than ever before, exporters should keep in mind that they are entering a slow and unstable economic period, where consumer spending is declining and unemployment is rising.
Tariff, trade, pricing, rights
Tariff and Trade Regulations: The Customs General Administration (CGA) assesses and collects tariffs. Import tariff rates are divided into two categories: the general tariff and the minimum (most-favored-nation) tariff. Imports from the United States are assessed at the minimum tariff rate, since the U.S. has concluded an agreement with China containing reciprocal preferential tariff clauses. The five Special Economic Zones, open cities, and foreign trade zones may offer preferential duty reduction or exemption. Companies doing business in these areas should consult the relevant regulations.
Taxation: Besides the assessment and collection of tariffs, the Customs General Administration (CGA) collects a value-added tax (VAT), generally equal to 17 percent, on imported items. Certain imports are also subject to a consumption (excise) tax, such as cigarettes, liquor and fuel. China has recently reduced rebates of VAT to exporters, which has had a significant impact on the operations of both foreign invested and domestic enterprises engaged in the exporting of goods produced with domestic inputs. The reduction amounts to a fixed irrecoverable levy of eight percent of the value added in China.
Foreign Ownership and Licensing: While China is in the process of eliminating a great number of import licensing requirements, licenses will continue to be required after the Memorandum of Understanding is implemented for certain items including rubber products, wool, passenger vehicles, and hauling trucks.
Since 1978, China has actively sought foreign direct investment (FDI) and technology to promote its modernization efforts and accelerate its export trade capabilities.
Import and Export Controls and Documentation: Requirements are handled by the Chinese importer (agent, distributor or joint venture partner). Necessary documents include the bill of lading, invoice, shipping list, sales contract, an import quota certificate for general commodities (where applicable), import license (where applicable), inspection certificate issued by the State Administration for Import and Export Commodity Inspection (SACI) or its local bureau (where applicable), insurance policy, and customs declaration form.
Free Trade Zones: China has established a number of duty-free import/export zones, located in Dalian, Tianjin, Shanghai, Guangzhou, and Hainan. Other free trade zones are envisioned in other SEZs and open cities in China. Privileges similar to those offered in the officially-designated free zones can also be found in the other SEZs and open cities, but restrictions and charges can affect venture operations and business there.
Trade Financing: More sources of financing for imports and investment exist than at any time since China’s initial opening to the outside world. The World Bank, based in Washington, D.C., maintains a large loan program in China. It is in the process of gradually shifting its programs away from key infrastructure projects in transportation and energy toward environmental and agriculture support. The International Finance Corporation (IFC) has become increasingly active in China. Its mandate is to assist joint venture and share holding companies with substantial non-state ownership to raise capital in the international markets. A variety of government loans are available.
Marketing and Selling Factors/Techniques: Personal relationships in business are critical. The Chinese like to deal with “old friends,” and it is important for exporters, importers, and investors to establish and maintain close relationships with their Chinese counterparts and relevant government agencies. American exporters should encourage strong personal relationships between their Chinese agents or distributors and the buyers and end-users.
Product Pricing: Most Chinese consumers are sensitive to price and will usually choose the less expensive product, unless they can be swayed by after-sales service or clear product superiority. For larger purchases, attractive financing that lowers the effective price is offered by Japanese, European and other foreign governments and may make some U.S. goods look less competitive.
Trademarks/Patents/Copyrights: Although problems remain with enforcement, China’s trademark regime basically conforms to world standards.
China has a “first-to-register” system that requires no evidence of prior use or ownership, leaving registration of popular foreign marks open to anyone. The Unfair Competition Law extends IPR protection to trade redress. Under the trademark law, foreign parties must utilize the services of registered Chinese agents to submit the trademark application. Foreign attorneys or the Chinese agent can prepare the application.
China acceded to the patent cooperation treaty on January 1, 1994, and will perform international patent searches and preliminary examinations of patent applications. Under the patent law, foreign parties must utilize the services of a registered Chinese agent to submit the patent application. Foreign attorneys or the Chinese agent can prepare the application.
Key Contacts
Rhode Island Export Assistance Center (RIEAC) and World Trade Center
Raymond W. Fogarty, Director
Edward Barr, World Trade Center Manager
Telephone: (401) 232-6407 or (401) 232-6408
Fax: (401) 232-6416 E-Mail: mailto:postoffice@itdn.net
postoffice@itdn.net
Websitehttp://www.rieac.org
Rhode Island Economic Development Corporation (RIEDC)
Maureen Mezei, International Trade Director
Telephone: 222-2601, ext. 123
E-Mail: mmezei@riedc.com
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsushashi, International Trade Specialist
Telephone: (401) 528-5104
E-Mail: mailto:kyatsuha@mail.doc.gov” kyatsuha@mail.doc.gov
Embassy of the People’s Republic of China
2201 Wisconsin Avenue, N.W.,
Washington, DC 20007
Tel: (202) 338 – 6688
Fax: (202) 588 – 9760
Website: http://www.china-embassy.org
Consulate General of the People’s Republic of China
520 12th Avenue
New York, NY 10036
Tel: (212) 868 – 7752
Fax: (212) 502 – 0245
Website: http://www.nyconsulate.prchina.org/
http://www.nyconsulate.prchina.org/
News Websites:
http://www.cnd.org/ China News Digest
http://www.china news.org/bjreview/Beijing Review
http://www.chinadaily.com.cn/ China Daily
Country Profile
Compiled by Providence Business News,
in collaboration with Bryant College Export Assistance Center.
