CIRCULAR OF THE STATE COUNCIL ON ITS APPROVAL AND TRANSMISSION OFTHE REPORT SUBMITTED BY THE STATE ADMINISTRATION FOR COMMODITY PRICES,REQUESTING INSTRUCTIONS ON SEVERAL PROBLEMS CONCERNING THE FIXING OFPRICES OF INDUSTRIAL GOODS
CIRCULAR OF THE STATE COUNCIL ON ITS APPROVAL AND TRANSMISSION OFTHE REPORT SUBMITTED BY THE STATE ADMINISTRATION FOR COMMODITY PRICES,REQUESTING INSTRUCTIONS ON SEVERAL PROBLEMS CONCERNING THE FIXING OFPRICES OF INDUSTRIAL GOODS
SUPPLIED FOR EXPORT
Important Notice:
This English document is coming from the "LAWS AND REGULATIONS OF THE
PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7)
which is compiled by the Brueau of Legislative Affairs of the State
Council of the People's Republic of China, and is published by the China
Legal System Publishing House.
In case of discrepancy, the original version in Chinese shall prevail.
Whole Document
CIRCULAR OF THE STATE COUNCIL ON ITS APPROVAL AND TRANSMISSION OF
THE REPORT SUBMITTED BY THE STATE ADMINISTRATION FOR COMMODITY PRICES,
REQUESTING INSTRUCTIONS ON SEVERAL PROBLEMS CONCERNING THE FIXING OF
PRICES OF INDUSTRIAL GOODS SUPPLIED FOR EXPORT
(August 21, 1979)
The State Council has given its consent to the "Report Requesting
Instructions on Several Problems Concerning the Fixing of Prices of
Industrial Goods Supplied for Export" submitted by the State
Administration for Commodity Prices, and the Report is hereby transmitted
to you for prompt study and implementation.
REPORT REQUESTING INSTRUCTIONS ON SEVERAL PROBLEMS CONCERNING THE FIXING
OF PRICES OF INDUSTRIAL GOODS SUPPLIED FOR EXPORT
(Excerpts)
In November, 1965, the State Council promulgated Interim Provisions
Concerning the Unified Measures for Fixing Prices of Industrial Goods
Supplied for Exports. The implementation of these Provisions has played an
active role in promoting the development of the production of export
commodities, in strengthening the business accounting in the foreign trade
department as well as in the supplier departments, and mutual assistance
and cooperation between these departments, and in fulfilling the task of
exportation set by the State. At present, judged by what has been achieved
in recent years, the basic principles laid down in this document for
fixing prices of export commodities supplied are still practicable, and
these principles shall continue to be implemented.
However, in recent years, some new problems have emerged with the
development of foreign trade and with the increase in the exportation of
industrial and mineral products. In order to develop foreign trade
vigorously, to expand export actively, to generate foreign exchange
earnings by a big margin for the State, and to promote socialist
modernization, it is urgently necessary to find an appropriate solution to
several problems concerning the fixing of prices of export industrial
goods. The following are our recommendations on the solution to these
problems:
I. The Guiding Principle for Fixing the Prices at Home of Export
Industrial Goods
The basic principle for fixing the home prices of export industrial goods
should remain that of same price for goods of same quality, and high price
for goods of high quality on the basis of prices of industrial goods for
domestic sales. However, certain special characteristics of export
industrial goods should also be taken into full consideration. The fixing
of prices at home for export industrial goods should be conducive to
bringing into play the initiative of the industrial departments and the
foreign trade departments, to improving the quality of export commodities,
to increasing the variety of designs and patterns, to upgrading the
packaging and decoration, to speeding up delivery, to meeting the demands
of the international market, and to enabling better and more flexible
export business operations. The industrial departments and the foreign
trade departments should, in dealing with the problem of fixing prices for
export industrial goods, have a heightened sense of the whole, starting
from the interests of the country as a whole, promote mutual assistance
and coordination, work in harmony with one another, provide each other
with data concerning the production and marketing of export commodities,
the comparability in quality, production costs, exportation for earning
foreign exchange, etc., and work energetically towards the same goal of
developing production, expanding export, and generating more foreign
exchange earnings.
II. Price-Fixing Problems Relating to Commodities That Cause Big Export
Losses Though High in Industrial Profits
With respect to those industrial goods whose producer price is high,
industrial profits are good, production potential is great, and sale has
yet to be expanded, the producer price and market price may with the
approval of the competent authorities for commodity prices, be reduced by
an appropriate margin. If the producer price of goods for export and the
producer price of goods for domestic sales are to be reduced at the same
time, the principle of "same price for goods of same quality, and high
price for goods of high quality" should apply to products for export and
to those for domestic sales. For such products whose domestic sale price
is not to be reduced for the time being and whose prospect for export is
bright though their exportation still causes great losses in spite of the
efforts made by the foreign trade departments in rational export business,
their producer price for export may, with the consent of the department(s)
concerned after consultation, be reduced first without reducing their
producer price for domestic sales, on the condition that the fulfillment
of the export plan is not affected. With respect to some areas where it is
not possible to reduce the producer price of goods for export, the
enterprises concerned should strive to reduce their production costs, and
to catch up with the advanced level within a prescribed time limit; and
within a specific period of time, the relevant foreign trade departments
must continue to purchase the produce manufactured in these areas for
export, in accordance with the State plan or with the contracts signed by
foreign trade departments with industrial departments. For such products
with no big industrial profits but high tax rates, resulting thus in high
producer price and large export losses, the relevant foreign trade
department or industrial department may file an application for a
reduction of, or exemption from, taxes; and the case(s) shall be submitted
to the Ministry of Finance or to the people's governments of the
provinces, autonomous regions, or municipalities directly under the
Central Government for approval before execution.
III. Price-Fixing Problems Relating to Export Commodities That Yield
Meagre or No Industrial Profits, or Cause Losses
There are some industrial goods, which sell well on the international
market, and earn high rates of foreign exchange, but whose producer price
is too low; under normal circumstances and with rational management the
enterprises concerned can only manage to have a break-even between costs
and profits, or have just meagre profits, or, worse still, suffer losses;
however, for the time being, it is inadvisable to raise the domestic
selling price. There is still another case: the domestic selling price is
basically reasonable; however, the special demands for the portion of
goods for export such as small quantities but rich varieties, result in an
increase in production costs. The two cases mentioned above may, with the
consent reached through consultation between the interested industrial
departments and foreign trade departments, be handled this way: with
respect to the portion of goods for export, on the principle of allowing
the producer enterprises to have a proper percentage of profits, the
problem may be solved by the properly purchasing price of goods for
export, on condition that the aforesaid readjustment does not hamper the
fulfillment of the marketing plan on the domestic market.
IV. The Price-Fixing Problem Concerning the Commodities Produced
Exclusively for Export
For those products manufactured exclusively for export, and those export
products manufactured by designated factories or by designated workshops,
as well as those export products manufactured from imported raw materials
(the raw materials are imported for this special purpose only), they may,
with the consent reached through consultation between the interested
foreign trade departments and industrial departments, be separated in
price ratio from those similar goods for domestic sales, and their
producer price shall be fixed in accordance with the production costs
calculated under the conditions of normal industrial production and
rational operation, plus a certain percentage of profits.
V. The Price-Fixing Problems Concerning the Products Manufactured under
the System of "Promotion of Exports by Importation of New Technology
and Equipment"
In accordance with Trial Measures Concerning the Promotion of Exports by
Importation of New Technology and Equipment, transmitted by the State
Council in March, 1979, cases concerning the price-fixing in Renminbi at
home for imported goods and materials needed for carrying out the system
of "promotion of exports by importation of new technology and equipment"
shall be handled, in principle, in accordance with the existing measures
for fixing prices for imported goods. With respect to a few varieties of
finished products, exported under the system of "promotion of exports by
importation of new technology and equipment", owing to the fact that the
domestic appropriation price, the profit rate and the tax rate for the
imported raw and auxiliary materials are too high, the foreign trade
department that undertakes the exportation of the aforesaid finished
products suffers a big export loss; so long as the aforesaid finished
products sell well on the international market, and the rate of foreign
exchange earnings is acceptable, the imported raw and auxiliary materials
needed may, with approval, have their price fixed by adding a commission
of 3% to the import cost. As regards the limits of powers for approval,
cases concerning imports by using the foreign exchange of the Central
Government, shall be examined and approved by the Ministry of Foreign
Trade; cases concerning imports by using the foreign exchange of
localities, shall be examined and approved by the competent pricing
authorities of the provinces, autonomous regions, or municipalities
directly under the Central Government. The Customs duties and consolidated
industrial and commercial taxes on the aforesaid goods and materials may,
with the exception of those which have been given preferential treatment
of exemption or reduction according to the clear-cut decision made by the
competent authorities under the State Council, be computed and levied in
accordance with the pertinent provisions promulgated by the State. Any new
applications filed by the departments and localities concerned for the
reduction of, or exemption from, import duties, shall be examined and
determined, in good time, by the Ministry of Foreign Trade and the
Ministry of Finance in accordance with the principle of being conducive to
the implementation of the system of "promotion of exports by importation
of new technology and equipment". With respect to those raw and auxiliary
materials which are imported regularly every year, relatively steady
domestic appropriation prices may be fixed through consultation in
accordance with the aforesaid principle. The industrial departments may,
on the basis of the aforesaid prices fixed for the raw and auxiliary
materials, calculate the production costs and the producer prices for
export products. The industrial profits for products of this category
shall be determined reasonably, in the light of the profit level of
similar industrial products, and by considering the actual profits and
losses in the operation of exportation. In the event that there is
insufficient supply of imported raw and auxiliary materials and that home-
produced raw and auxiliary materials have to be used, the Ministry of
Foreign Trade shall make up the price differences between home-produced
raw and auxiliary materials and imported raw and auxiliary materials for
the industrial departments.
The prices of imported raw materials specially required for the production
of packages for export products may also be fixed and approved in
accordance with the measures mentioned above.
VI. Price-Fixing Problems Concerning Some Home-Produced Raw Materials
There are some home-produced raw materials whose producer price is fixed
at a rather high rate because of the consideration for the price ratio
between the aforesaid products and other products of the same category or
other relevant products, and for the different conditions in different
localities, resulting in the high production costs and high producer
prices of the export products made from the aforesaid raw materials, and
comparatively large export losses; however the said export products are in
demand on the international market. In areas where the home-produced raw
and processed materials mentioned above are produced at very low
production costs before the unified re-adjustment of the producer prices
and thus the industrial profits are relatively high, the portion of the
aforesaid home-produced raw and processed materials to be used for the
manufacture of export products may, with the approval agreed upon through
consultation between the interested foreign trade departments and
industrial departments, have their producer prices fixed separately in
accordance with the principle that the producer enterprises shall have a
proper percentage of profits.
VII. The Limits of Powers for Approval of the Readjustment of Prices
According to the original provisions, cases concerning the readjustment of
prices of export commodities to prices lower or higher than those of
similar commodities for domestic sales, shall all be approved by the State
Administration for Commodity Prices. Such provisions are necessary for
carrying out strictly the principle of "same price for goods of same
quality, and pricing on the basis of quality" as far as both the
commodities for export and the commodities for domestic sales are
concerned; they are also necessary for avoiding aggravating conflicts
caused by price-fixing between different areas. However, with the daily
increase in the varieties of commodities for export, it would be difficult
for the State Administration for Commodity Prices to handle, in good time,
all pricing cases if every product is to be reported to it for examination
and approval, and this situation may affect to a certain extent the
arrangements for production and exports. Therefore, from now on, cases
concerning the fixing of prices for export commodities in accordance with
the measures mentioned in recommendations II through VI of this Report
shall, with the consent reached through consultation between the
interested foreign trade departments and industrial departments, be
submitted to, and handled by, the competent authorities concerned in
accordance with the limits of powers for the administration of prices at
different levels, namely, products whose prices are to be fixed by the
departments concerned under the State Council, shall be reported to,
examined and approved by the departments concerned under the State Council
which may, however, authorize the local competent authorities for the
administration of commodity prices, to examine and approve the prices of
part of varieties of export goods; products the prices of which are to be
fixed by the local authorities shall be reported to the competent
authorities for the administration of commodity prices of the provinces,
municipalities directly under the Central Government, and autonomous
regions for examination and approval. Commodity prices to be fixed by the
local competent authorities shall be reported to the departments concerned
under the State Council for the record. With respect to those products
whose prices need to be adjusted, the original prices shall be adhered to
in business transactions; before the new prices are notified to the
departments concerned at the lower levels, or, when necessary, business
transactions may, with the consent reached through consultation between
the interested supplying departments and foreign trade departments, or
with the confirmation by the local competent authorities for the
administration of commodity prices, be calculated on the basis of the
original prices and, after the new prices have been approved and notified
to the departments concerned at the lower levels, refund for any
overpayment or collect a supplementary payment for any deficiency.
After prices have been adjusted, it is necessary to stabilize them for a
period of time; it is inadvisable to change the prices of commodities for
export frequently because of price fluctuations on the international
market.
With respect to the changes, in terms of increases or decreases, in the
production costs and profits of the departments, the localities and
enterprises concerned, as a result of the adjustment of prices of export
commodities and raw and processed materials, the Central and local
planning departments and financial departments shall, when transmitting
plans to, or examining the performance of the departments at the lower
levels, take into consideration the aforesaid factors, and find ways to
solve the problems properly.
If nothing is deemed inappropriate in the Report, it is requested that the
Report be approved and transmitted to all the departments concerned and to
the provinces, municipalities directly under the Central Government, and
autonomous regions for study and implementation.
ring the actual profits and
losses in the operation of exportation. In the event that there is
insufficient supply of imported raw and auxiliary materials and that home-
produced raw and auxiliary materials have to be used, the Ministry of
Foreign Trade shall make up the price differences between home-produced
raw and auxiliary materials and imported raw and auxiliary materials for
the industrial departments.
The prices of imported raw materials specially required for the production
of packages for export products may also be fixed and approved in
accordance with the measures mentioned above.
VI. Price-Fixing Problems Concerning Some Home-Produced Raw Materials
There are some home-produced raw materials whose producer price is fixed
at a rather high rate because of the consideration for the price ratio
between the aforesaid products and other products of the same category or
other relevant products, and for the different conditions in different
localities, resulting in the high production costs and high producer
prices of the export products made from the aforesaid raw materials, and
comparatively large export losses; however the said export products are in
demand on the international market. In areas where the home-produced raw
and processed materials mentioned above are produced at very low
production costs before the unified re-adjustment of the producer prices
and thus the industrial profits are relatively high, the portion of the
aforesaid home-produced raw and processed materials to be used for the
manufacture of export products may, with the approval agreed upon through
consultation between the interested foreign trade departments and
industrial departments, have their producer prices fixed separately in
accordance with the principle that the producer enterprises shall have a
proper percentage of profits.
VII. The Limits of Powers for Approval of the Readjustment of Prices
According to the original provisions, cases concerning the readjustment of
prices of export commodities to prices lower or higher than those of
similar commodities for domestic sales, shall all be approved by the State
Administration for Commodity Prices. Such provisions are necessary for
carrying out strictly the principle of "same price for goods of same
quality, and pricing on the basis of quality" as far as both the
commodities for export and the commodities for domestic sales are
concerned; they are also necessary for avoiding aggravating conflicts
caused by price-fixing between different areas. However, with the daily
increase in the varieties of commodities for export, it would be difficult
for the State Administration for Commodity Prices to handle, in good time,
all pricing cases if every product is to be reported to it for examination
and approval, and this situation may affect to a certain extent the
arrangements for production and exports. Therefore, from now on, cases
concerning the fixing of prices for export commodities in accordance with
the measures mentioned in recommendations II through VI of this Report
shall, with the consent reached through consultation between the
interested foreign trade departments and industrial departments, be
submitted to, and handled by, the competent authorities concerned in
accordance with the limits of powers for the administration of prices at
different levels, namely, products whose prices are to be fixed by the
departments concerned under the State Council, shall be reported to,
examined and approved by the departments concerned under the State Council
which may, however, authorize the local competent authorities for the
administration of commodity prices, to examine and approve the prices of
part of varieties of export goods; products the prices of which are to be
fixed by the local authorities shall be reported to the competent
authorities for the administration of commodity prices of the provinces,
municipalities directly under the Central Government, and autonomous
regions for examination and approval. Commodity prices to be fixed by the
local competent authorities shall be reported to the departments concerned
under the State Council for the record. With respect to those products
whose prices need to be adjusted, the original prices shall be adhered to
in business transactions; before the new prices are notified to the
departments concerned at the lower levels, or, when necessary, business
transactions may, with the consent reached through consultation between
the interested supplying departments and foreign trade departments, or
with the confirmation by the local competent authorities for the
administration of commodity prices, be calculated on the basis of the
original prices and, after the new prices have been approved and notified
to the departments concerned at the lower levels, refund for any
overpayment or collect a supplementary payment for any deficiency.
After prices have been adjusted, it is necessary to stabilize them for a
period of time; it is inadvisable to change the prices of commodities for
export frequently because of price fluctuations on the international
market.
With respect to the changes, in terms of increases or decreases, in the
production costs and profits of the departments, the localities and
enterprises concerned, as a result of the adjustment of prices of export
commodities and raw and processed materials, the Central and local
planning departments and financial departments shall, when transmitting
plans to, or examining the performance of the departments at the lower
levels, take into consideration the aforesaid factors, and find ways to
solve the problems properly.
If nothing is deemed inappropriate in the Report, it is requested that the
Report be approved and transmitted to all the departments concerned and to
the provinces, municipalities directly under the Central Government, and
autonomous regions for study and implementation.
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