TRIAL MEASURES CONCERNING THE PROMOTION OF EXPORTS BY IMPORTATION

TRIAL MEASURES CONCERNING THE PROMOTION OF EXPORTS BY IMPORTATION Important Notice: This English document is coming from "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 TRIAL MEASURES CONCERNING THE PROMOTION OF EXPORTS BY IMPORTATION (Approved and promulgated by the State Council on March 26, 1979) In order to carry out the general task of the new period and to shift the focus of the work on to the track of socialist modernization, foreign trade should be greatly expanded and developed. Exports must be greatly increased for the purpose of introducing new technology and importing equipment in complete sets. All departments concerned and all regions should try their best and use every possible means to develop the production of export commodities; while tapping fully the domestic potentials for increasing the sources of export commodities, raw materials and technology from abroad should be utilized fully so as to bring into full play the domestic production capacity, to devote major efforts to the promotion of exports by importation and to expand export trade extensively and in a flexible way, thus increasing foreign exchange earnings, and strengthening the country's paying capability in foreign exchange.

1. The scope of promoting exports through importation: (1) to import materials for processing, including the importation of all raw and semifinished materials or key raw and semifinished materials, and to process them into finished products for export; (2) to import main component parts or fittings, and to process and assemble them into finished products for export; for example, to import ships' main engines or instruments for assembling vessels for export; (3) to mainly use home-produced raw and semifinished materials, and import auxiliary materials, then to process them into finished products for export; and (4) to import animal feeds, fertilizers, seeds, and breeding stocks, and to use them in growing and breeding occupations, then to use the animal, farm, and side-line products and local specialties for export; or to exchange imported commodities for home-produced farm and side-line products and local specialties, and to use them for export.

2. With respect to the raw, semifinished and auxiliary materials now supplied domestically for the production of export commodities, such supplies shall be guaranteed through the current supplying channel of materials and shall not be reduced or cut; the materials which can be supplied domestically shall not be imported or their importation shall be reduced. After the implementation of the policy of promoting exports by imports, various departments and areas, which are at present supplying commodities for export, shall maintain a normal increase in export with the development of production.

3. The commodities manufactured under the policy of promoting exports by importation, shall be marketable on the international market; profitable in earning foreign exchange; up to the quality standards for export; and can be manufactured domestically with a guarantee for the supply of fuels and power.

4. The amount of foreign exchange needed for carrying out the policy of promoting exports by importation shall be included in the state plan for the allocation of foreign exchange for imports, which shall be executed solely by the Ministry of Foreign Trade. The specific business operations shall be organized by the head offices of various national import and export corporations. The bureaus of foreign trade of various provinces, autonomous regions and municipalities directly under the Central Government shall be responsible for supervising and examining the use of foreign exchange for promoting exports by importation and the situation of business operations. Where bank loans in foreign exchange are needed for commodities for promoting exports by importation, the case shall be handled in accordance with the measures for granting short-term foreign exchange loans. With respect to the raw and semifinished materials, auxiliary materials and other materials supplied by businessmen abroad for processing on the basis of materials supplied, no matter letters of credit are mutually opened or not, so long as the payment is not actually effected in foreign exchange, the aforesaid materials shall not be counted as the materials used for promoting exports by importation.

5. The commodities for promoting exports by importation shall, after consultation made by the foreign trade departments with the relevant regions or departments, be included in the state plans for production and for foreign trade, and the following principles shall be implemented step by step; separate plans; direct allocation of materials; production at designated units and production quota fixed according to sales conditions.

On the condition that the fulfillment of the state plan is guaranteed, if there still exist production potentials and products marketable on the international market can be timely exported, then arrangements may be made for extra exports for promoting exports by importation beyond the plans, and the foreign trade bureaus of provinces, autonomous regions, or municipalities directly under the Central Government shall be responsible for organizing this matter; the foreign exchange needed for the production shall be allotted specially by the Ministry of Foreign Trade.

6. The materials imported, and the products exported for promoting exports by importation, shall not be included in the domestic scheme for balanced distribution; imported materials shall, step by step, be allocated directly by foreign trade companies to production units, and the products shall be supplied directly by the production units to foreign trade companies which shall purchase the products for export.

7. The production of products for promoting exports by importation shall be arranged on the basis of good quality. For the manufacture of industrial commodities, only factories with better production conditions shall be designated specially for the said purpose. With respect to farm and side-line products and local specialities, the production shall be developed in the light of local conditions with tracts of land assigned for the purpose. The aforesaid designation of factories and division of arable land shall remain relatively stable.

8. In accordance with the principle of "integration of military production and civil production" and "integration of production in peacetime and that in wartime", it is imperative to tap the productive potentials of the military industrial enterprises, and to made full use of these military industrial enterprises in promoting the production of export commodities for promoting exports by importation. The prices of export commodities manufactured by the military industrial enterprises shall be fixed according to the principle of "same quality, same price" as the export commodities manufactured by civil enterprises.

9. With respect to industrial commodities for promoting exports by importation, the foreign trade company and the production or supplying unit shall conclude and sign an economic contract or agreement, in which are stipulated their respective obligations. In the event that either of the two parties fails to execute the said contract or agreement, which consequently has given rise to economic losses, the violator shall be liable for compensating for the economic losses.

10. With respect to the farm and side-line products, livestock products and local specialties for promoting exports by importation, while arrangements are being made for the importation of animal feeds, fertilizers, seeds and breeding stocks, the foreign trade company and the production or supplying unit shall reach an agreement through consultation concerning the increase of varieties and quantity, the specifications and quality of the commodities they supply for export, as well as the time for delivery.

11. With respect to the industrial products for promoting exports by importation, the foreign trade company and the production or supplying unit shall reach an agreement through consultation concerning the rate of quality products for export, the rating for the consumption of raw, semifinished, and auxiliary materials, and the time for delivery.

Those production enterprises, whose rate of quality products for export is low, thus unable to guarantee the quality of their products, and whose consumption of raw and semifinished materials and production costs are high, are not eligible to be engaged in "promoting exports by importation".

12. With respect to the earnings of foreign exchange from commodities for promoting exports by importation, business accounting shall be carried out item by item, and the rate of foreign exchange earnings from exporting finished goods should generally be controlled at the rate from 30% to 50% or higher. The rate of foreign exchange earnings from products that call for more sophisticated production technology shall be higher, while the rate of foreign exchange earnings from products that are turned out with simpler production technology shall be lower, but it shall not be lower than 30%.

13. Production enterprises (including state-run farms) that engage in promoting exports by importation shall try their best to fulfil their production tasks on time with the required quality and quantity and deliver their goods on schedule. In the event that a production enterprise undertakes the task of manufacturing a particular item of export product in small quantity, with complicated designs and varieties and a very short time limit for delivery, and consequently suffers a loss in its normal profit earnings, the foreign trade company shall make compensation for this by giving the production enterprise a necessary subsidy not included in the calculated purchasing prices after the foreign trade department and the relevant departments have reached an agreement through consultation.

14. The making of prices in Renminbi within the country for the imported goods and materials needed for promoting exports by importation shall, in principle, be handled in accordance with the current measures for making prices for imported goods. With respect to a few varieties of export goods included in promoting exports by importation, which, as a consequence of the high domestic appropriation prices of imported raw and auxiliary materials or the high profit and tax rates, give rise to great losses in exporting such finished goods, so long as the aforesaid varieties of goods sell well on the international market and the rate of earnings in foreign exchange is acceptable, they may, with approval, be imported through agency by the foreign trade department and only service fees shall be charged or Customs duty/consolidated industrial and commercial tax be exempted from. The products supplied by production or supplying units for export shall calculate the production costs in accordance with the actual appropriation price of the said raw and auxiliary materials imported through the foreign trade channel.

15. With respect to the retention quota of foreign exchange earnings from the commodities for promoting exports by importation, the case shall be handled in accordance with the retention measures prescribed uniformly by the State. With respect to the business activities carried out for promoting exports by importation, all regions and areas, all departments concerned, as well as foreign trade companies and production enterprises, shall set up special register and compile statistics for the said business activities, strengthen the cost check-up and accounting, and guarantee the completeness of all business vouchers and original records.

16. With respect to those production or supplying units engaged in promoting exports by importation, which maintain better business performance and higher foreign exchange earnings, higher pay, more bonuses and welfare allowances may be allowed. As to those production or supplying units which turn out poor quality products, embezzle imported goods and materials, and plot to share among themselves the products, an investigation shall be made into their illegal acts, and their cases shall be dealt with seriously.

17. To the production or supplying units engaged in promoting exports by importation, the foreign trade companies should, at any time, provide the aforesaid production or supplying units with specimens and samples of foreign advanced products as well as relevant technical data, invite the personnel from the production or supplying units to participate in business talks with foreign companies or businessmen, organize, according to plan, study groups to carry out investigations abroad, and invite foreign businessmen for technical exchange.

18. All regions and areas, and all departments concerned, should strengthen the leadership of the work concerning the production of export commodities for promoting exports by importation, enthusiastically organize the implementation, and solve the problems arising in production and supply of goods. The production and supplying units and foreign trade departments should sum up, in good time, their experience so as to push forward the steady development of this work.