China confident of foreign trade growth in 2014

China is confident of achieving 7.5 percent foreign trade growth target in 2014, saidCommerce Minister Gao Hucheng on Friday. Gao said China has yet to become a strong trading power as most of its foreign tradeproducts are low value-added and the country has yet to foster more independent brands. China accounts for 12 percent of global trade volume and is now the largest trading partner of120 countries, he said. China needs to speed up industrial restructuring, Gao added.

China, a magnet for foreign investment

China remains an attractive destination for foreign investors, said Gao. Given the background of a weak global economic growth, foreign investment in Chinaincreased 5.3 percent year-on-year in 2013, reaching $117.6 billion. More than half of the investment went to the service industry, rather than the manufacturingsector as it used to be, which is a great change in the investment structure, said Gao. Although facing rising costs and contracting edges in preferential treatment, over 85 percentof foreign companies are profitable and over 90 percent of them are still willing to conductbusinesses in China. The ministry will make further efforts to improve the investment climate, he added.

APEC role is not weakening

Gao dismissed the argument that Asia-Pacific Economic Cooperation’s (APEC) role isweakening in promoting regional economy and trade cooperation. It is still the most influential bloc in the Asia-Pacific region, with the biggest number ofmembers, Gao said. None of the 21 APEC members believe that the APEC is weakening, he said. It has been an important organization for China. APEC members accounted for 60 percent of China’s foreign trade, nearly 70 percent of thecountry’s foreign direct investment and 83 percent of foreign investment in China in 2013, andeight of China’s 10 major trading partners are APEC members, according to Gao. The theme of the APEC’s China Year is “Jointly Building Future-oriented Asia-PacificPartnership”. China will work with other APEC members to make sure that the APEC informal leadersmeeting, which will be held in China later this year, bring practical benefits to the region, Gaosaid. In 2014, China will expand common ground with other APEC members to promote regionaldevelopment and contribute to global economic development and prosperity. In terms of investment and trade, China’s major efforts will be devoted to promoting theestablishment of APEC free-trade area and China will continue to support multilateral tradingmechanism and oppose trade protectionism, Gao said.


China pays high attention to TPP talks

China has an open and tolerant approach toward all regional free-trade agreements, includingTrans-Pacific Partnership Agreement (TPP),Gao said. China is assessing the TPP and is in touch with all the major members of TPP. Gao said that regional and bilateral free-trade agreements can complement the world’smultilateral trade system and China is in talks with countries such as Australia and Koreafor free trade agreements.

China’s Rising Manufacturing Costs: Challenges and Opportunities

The recent decades of China’s export-driven economic growth has come at the cost of severe pollution to the environment, which has in turn posed a threat to the health of its inhabitants. The downturn in the global economy also led China to realize the vulnerability of its economic model due to its dependence on the demands of its overseas markets. To transform and rebalance its economy, China has been actively promoting the development of its service sector, high-tech industries and domestic consumption so as to ensure sustainable growth. In this regard, the government has driven up minimum wages, allowed the yuan to appreciate, aggressively enforced labor and environmental regulations, thus increasing the costs of manufacturing in China and driving out low-end businesses.

In China’s rush to wean itself from being an export-driven economy and into a consumer-based economy, it is State policy to place more money in the hands of Chinese nationals. This means that China has a specific agenda of raising workers’ salary levels on an annual basis. Annual increases in Chinese worker salaries and the increasing mandatory welfare costs associated with this are making some local governments in China have to strike a fine balancing act between making companies happy (with no further raises to labor cost) and workers demanding higher salaries — which will attract more workers and increase local consumption.

Wage Increases in China

For some time now, rising labor costs in China have been setting off alarms among foreign investors. According to China’s Employment Promotion Plan, the minimum wage in each jurisdiction must be increased at least once every two years; meanwhile, the 2011-15 Five- Year Plan stipulates an average increase of 13 percent per year. Based on 2014 figures, however, it looks like China’s wage increases have begun to slow down, as the Central Government exerts pressure on maintaining economic growth targets.

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Wage standards in China are set for individual cities, provinces and other administrative units by their respective local governments, rather than on a nationwide basis. As of June of this year, wages had been hiked in a total of eleven areas–Beijing, Chongqing, Gansu, Guangdong (Shenzhen), Qinghai, Shaanxi, Shandong, Shanxi, Shanghai, Tianjin and Yunnan–at an average of 11 percent for monthly minimum wage increases. Most recently, an additional wage increase for Sichuan took effect on July 1, 2014. Based on the date of their last respective updates, wages will also be increased in Hebei, Heilongjiang and Tibet before the year is up. If this trend continues through the remainder of 2014, some 26 regions may be on track for increases to their minimum wage. This is slightly better news for foreign investors when compared with last year’s total of increased wages in 27 provincial-level jursidictions at an average of 17 percent.


Many China commentators have been focusing on the increasing labor costs in China, and noting how many China-based businesses are now struggling in the face of rising wages. The China-ASEAN free trade agreement (FTA), which was signed off in 2002 and came into effect more than three years ago, offers a way out by allowing companies to reposition manufacturing to other low cost areas of Asia, yet still be able to service the China market via the duty-free imports permitted under the FTA. With ASEAN including the vibrant economies of Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam, together with smaller regional players such as Brunei, Cambodia, Laos and Myanmar, this single agreement is reshaping the coordinated development of China-ASEAN manufacturing.


The ASEAN–China Free Trade Area is the world’s largest free trade area in terms of population and third largest in terms of nominal GDP after the European Union and NAFTA. The original FTA reduced tariffs on nearly 8,000 product categories, or 90 percent of imported goods, to zero. The average tariff rate on Chinese goods exported to ASEAN is now only 0.6 percent, down from 12.8 percent, while the tariff rate on ASEAN goods exported to China also fell from 9.8 percent to 0.1 percent.

These favorable terms have taken effect in China and original ASEAN members, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Cambodia, Laos, Myanmar and Vietnam will implement these terms in 2015.

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China manufacturing growth hits six-month high in June


The manufacturing sector has been a key driver of China’s economic growth


China’s manufacturing activity grew at its fastest pace for six months in June, suggesting that recent stimulus moves have started to have an impact.

The official purchasing managers’ index (PMI) rose to 51, from 50.8 in May.

The PMI is a key indicator of the sector’s health and a reading above 50 shows expansion.

China, the world’s second-largest economy, has taken various steps in recent months – including cutting taxes for small firms – to help boost growth.

Last month, China’s central bank said it would cut the reserve requirement ratio (RRR) – the amount of cash banks needs to keep in reserve – for banks engaged in lending to agriculture-related businesses and small companies.

China’s central bank, the People’s Bank of China, said it would also encourage banks to lend more to exporters to boost shipments.

In April, the government said it would cut taxes on small firms and speed up the construction of railway lines across the country.

The government has also announced plans to build railways, roads and airports along the Yangtze River – which connects China’s less developed inland provinces to Shanghai.

China’s economy expanded at an annual rate of 7.4% in the January to March period, from a year ago, down from 7.7% growth in the final quarter of last year.


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