China and the World Trade Organization

IV. China Is Actively Advancing Opening-Up to a Higher Level

Fulfilling China’s WTO commitments has never been the end point of its opening-up. In the face of the overwhelming trend of economic globalization and its winding path, China keeps pace with the times, takes firm steps to expand opening-up, and makes continuous efforts to open up in a more comprehensive, profound and diversified way, with a view to achieving greater mutual benefit and win-win outcomes.

1. Promoting balanced development of trade

China pursues a trade strategy of mutual benefit, win-win, diversification and balanced development. It endeavors to raise the quality and added-value of its exports, proactively increase imports, and better integrate into the global value chains. China never deliberately pursues trade surplus in goods. At the same time, China takes an objective view towards existing trade deficit in services. The country always welcomes imports that diversify market supply, improve people’s quality of life, and upgrade its industrial structure. In recent years, on top of its commitments to the WTO, China has self-initiated significant reductions to import tariffs on an interim basis for multiple times. According to the WTO, China’s trade-weighted average import tariff rate had fallen to 4.4 percent in 2015, only 1.5 to 2 percentage points higher than those of developed economies such as the US and the EU. By the end of 2017, China had reduced tariffs on more than 900 tariff lines. At the 2018 Boao Forum for Asia Annual Conference, China announced plans to further reduce import tariffs and to import more high-quality, distinctive products that meet the strong demand of the Chinese people.

2. Facilitating international trade

China’s efforts to implement the WTO Trade Facilitation Agreement, which entered into force in February 2017, have resulted in impressive improvement in China’s trade facilitation. The average time for customs clearance has been reduced to less than 20 hours for imports and less than two hours for exports. China has accelerated the establishment of a single window for international trade. By the end of 2017, the China International Trade Single Window had been connected to 11 authorities and agencies responsible for border control and covered basically all major import and export procedures. This one-stop system enables traders to use a single entry point to declare freight and taxes with a single submission of documents, and track the results after a single joint inspection by the participating authorities. It has accelerated the modernization of China’s port management. China will further optimize supervision and management approaches, reform port administration regime and streamline procedures and reduce costs for import and export, to create a more business-friendly environment at the port.

3. Substantially widening market access for foreign investment

China has adopted a foreign investment administration model of pre-establishment national treatment plus negative list. This move marks an institutional reform in response to new developments in economic globalization and changes in international rules for investment. In September 2016, the Standing Committee of the National People’s Congress amended four laws including the Law on Foreign Invested Enterprises. For those foreign-invested enterprises not subject to the special administrative measures on access to foreign investment (the negative list), their establishment and changes are now administered by a “filing for record” approach instead of the examination and approval system. In the first half of 2018, revision of the negative list for foreign investment was completed and the “Notice of the State Council on Measures for Using Foreign Investment Actively and Effectively to Promote High-Quality Economic Development” was issued to further widen market access considerably. China is making efforts to steadily liberalize its financial sector, constantly open up the services industry, and deepen the opening-up of agricultural, mining and manufacturing sectors.

As regards the shipbuilding industry, China will lift foreign equity caps for companies engaged in the design, manufacturing and repair of vessels in 2018. Moreover, China will lift foreign equity caps on airplane manufacturing of trunk airliners, regional jets, utility aircrafts, helicopters, drones and lighter-than-air aircrafts. In the automobile industry, China will remove foreign equity caps on manufacturing of special-purpose vehicles and new-energy vehicles, and phase out those on all automotive ventures over the next five years.

4. Creating a more attractive environment for foreign investment

China makes efforts to create a favorable and orderly investment environment, ease market access for foreign investment, further simplify the administrative procedures on access to foreign investment, build pilot free-trade zones (FTZs) with high standards, and better promote and protect foreign investment. China works to improve an investment climate that conforms to international rules, facilitates foreign investment and is based on the rule of law, and to make its market more transparent and better regulated. These efforts will help attract more foreign investment into China and ensure its effective utilization.

By March 2018, all items for non-administrative license approval had been cancelled, and items for administrative approval had decreased by 44 percent as compared to March 2013. The number of investment projects by enterprises subject to verification of the central government had been reduced by 90 percent. China has comprehensively reformed its systems for business registration and registered capital, rolled out the subscribed capital registration system, and revoked 87 percent of the items subject to examination and approval preceding the industrial and commercial registration. The time for business establishment has been shortened by at least one third. In order to alleviate the burden on businesses, China is advancing the reform of the negative list for market access, promoting the concept of “everything that is not forbidden is allowed”, and reinforcing the impartiality of law enforcement.

China will continue with the reform to streamline administration, lower taxes, and reduce fees. China will further align its business environment with international economic and trade rules, enhance policy transparency, strengthen the protection of property rights, advance the rule of law, encourage competition and oppose monopoly. The enactment of the Law on Foreign Investment will be expedited to build a legal system for foreign investment that meets the needs of reform and opening-up in the new era, elevate opening-up to a higher level, push for deeper reform in the foreign investment administration system, and protect the legitimate rights and interests of foreign investment and foreign investors. The threshold will be lowered for foreign talents to work and start their own businesses in China. In addition, China will improve various development zones, build the pilot FTZs with high standard and good quality, and explore the construction of free-trade ports with Chinese characteristics.

5. Regulating outward investment

China encourages its enterprises to abide by local laws, fulfill corporate social responsibilities and observe business principles and international practices when they do business in host countries and conduct outward investment cooperation. China will continue to promote the sustainable, reasonable, orderly and sound development of outward investment, and effectively prevent risks of all kinds. Meanwhile, in order to create a more equitable, transparent and predictable environment for foreign investment, China calls on host countries to refrain from abusing security review or adopting other restrictive practices to impose excessive limitations on foreign investment.

6. Advancing the Free Trade Area Strategy

The multilateral trading system and regional trade arrangement are the two wheels driving economic globalization forward. China upholds the multilateral trading system and promotes free trade arrangements. By May 2018, China had signed 16 free trade agreements (FTA) with 24 countries and regions. In 2017, trade between China and its FTA partners (excluding Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan Province) accounted for 25.9 percent of China’s total foreign trade. In those free trade agreements, basically 90 percent of imported products enjoy duty free treatment, and approximately 120 service sectors have been opened to foreign suppliers, compared to 100 service sectors in China’s commitments to the WTO at the time when China joined the organization. Committed to advancing economic globalization and safeguarding free trade, China is negotiating with relevant parties the Regional Comprehensive Economic Partnership for its early conclusion and implementation, and is accelerating the building of Free Trade Area of Asia-Pacific and East Asia Economic Community. With all these efforts, China will build a high standard network of free trade areas, focusing on the neighboring areas, radiating across the Belt and Road and open to the world.