By Jiang Wei (China Daily)
Updated: 2007-07-26 08:38

The government has pledged to further curb exports of cheap labor-intensive products and enlarge imports, narrowing the bloating trade surplus.

China will again expand the list of processed goods subject to export limits by the end of this year, Wang Qinhua, director with the Ministry of Commerce (MOFCOM)'s department of Mechanic, Electronic and Hi-Tech Industry, said yesterday.

The announcement followed a similar expansion of the list announced on Monday by MOFCOM and the General Administration of Customs. Enterprises who work processing certain items will have to deposit half of the levy, including duty and value-added tax, to customs.

"The new policy will add to the cost burden on exporters and will affect their cash flow. Those engaged in the labor-intensive part of the industry will be most affected," Wang said.

She said she expected the new policy would force exporters to increase the value to their products, upgrade technology and move up the industrial value chain.

She added that the changes will not apply to western and central China, giving regions with cheaper labor a chance to develop processing bases previously clustered in the coastal provinces.

Processed goods are regarded as a major source of China's record high trade surplus, which hit $112.5 billion in the first half of 2007.

While restricting exports of labor- and resource-intensive products, China is also adopting various measures designed to enlarge imports and help balance the trade surplus, said Wang Shouwen, director of MOFCOM's foreign trade department.

He said China will double the size of the import pavilion at the Canton Fair - the nation's largest trade event - this autumn, encouraging foreign businesses to take advantage of recently-signed trade arrangements, such as free trade agreements and tariff reductions.

Sino-EU textile trade

China's textile exports to the European Union are not expected to see a sharp increase next year after the European economic bloc removes quota restrictions on the textile trade according to a bilateral agreement signed in June 2005, Wang Shouwen said.

"China is seeking some measures to guarantee a steady growth in textile trade with the EU," he said, adding textile exports to the EU were only up 5.5 percent in the first five months of this year from a year earlier.

Doha talks

MOFCOM spokesman Wang Xinpei said the latest proposals at the Doha world trade talks on cutting farm export subsidies are "positive to moving the multilateral talks forward", but added that "there are still a few improvements to be made in the content".

Last week the World Trade Organization's chief agriculture negotiator suggested reducing farm export subsidies to below $16.2 billion a year, compared with the current $19 billion.

Wang said China is studying the recommendations, which are aimed at breaking a nearly six-year deadlock which has paralyzed the WTO's Doha Round of trade talks.