WTO publishes Trade Policy on China

WTO China’s previous Trade Policy Review was in 2018, Since then, the long-term structural changes in China’s economy, moved away from agriculture and industry towards services. Services now make up some 55% of GDP.

China’s merchandise exports increased every year during the review period, to attain a peak of nearly USD 2.6 trillion in 2020. Exports fell in the first half of 2020 due to the COVID‐19 pandemic, but grew strongly afterwards due to China being the first manufacturing power to resume operations after the first wave of global shutdowns, and its role as leading supplier of protective health equipment and electronics related to working from home. At over 44%, machinery and electrical equipment continue to represent a very large and rising share in China’s merchandise exports. The United States and the European Union remain China’s main destinations for merchandise exports. Asia remains the most important region for China’s merchandise exports, with a share of over 44% in 2020. Within Asia, Japan and the Republic of Korea are the most important trading partners. Africa and the Middle East received between 4% and 5% of China’s exports, while the share for Latin America fluctuated around 6%.

China’s merchandise imports increased sharply between 2016 and 2018, but fell in 2019 and 2020. At about 35%, machinery and electrical equipment make up an important and stable share of China’s imports, followed by mineral products (some 25%). The European Union remains the most important supplier of goods, while the share of the United States in China’s imports fell, from nearly 9% in 2015 to 6.6% in 2020. The share of imports originating in Asia fluctuated at around 47% between 2016 and 2019, but increased to over 49% in 2020. Africa, Australia, and the Middle East account for about 4%, 5%, and 7% of China’s merchandise imports, respectively.

China’s services exports grew from USD 217 billion in 2015 to USD 244 billion in 2019, but fell to USD235 billion in 2020. They are mostly composed of various business services, transportation, and travel. Services imports grew from USD 436 billion in 2015 to USD 506 billion in 2019, but fell to USD 380 billion in 2020. Travel is traditionally by far the most important individual category.

China has taken various trade-facilitating measures with respect to import registration, documentation, and inspection requirements, as well as in response to the COVID-19 pandemic. Its national single window for international trade was extended and, reportedly, the overall customs clearance time for imports nationwide was reduced.

15. China’s simple average applied most-favoured nation (MFN) rate decreased from 9.3% in 2017 to 7.1% in 2021, with tariff-rate reductions in nearly all product categories. The percentage of tariff lines bearing rates higher than 15% (international tariff peaks) was 4.5% in 2021, significantly lower than the 13.9% in 2017. Applied MFN tariffs ranged from 0%-65%; the highest tariffs of 65% apply to 20 agricultural tariff lines. China applies lower tariffs under its preferential trade agreements (PTAs) and RTAs. The share of duty-free tariff lines in China’s RTAs ranges between 0.04% (RTAs with Hong Kong, China and Macao, China) and 6.6% (Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipei)). Duty-free lines accounted for 12.6% of all lines. China also grants preferential tariff treatment to imports from least developed countries (LDCs) that have established diplomatic relations with China and completed the exchange of diplomatic notes. By February 2021, China had implemented zero tariffs on 97% of tariff lines for these 41 LDCs.

During the review period, a new Export Control Law was adopted; it provides for the establishment of a single framework for restricting exports of controlled items, i.e. dual-use items (with both civilian and military applications); military products; nuclear products; and goods, technologies, and services that are related to the maintenance of national security and interests and the implementation of international obligations such as nuclear non-proliferation.

35. During the review period, China continued to liberalize its financial sector to allow increased foreign participation. A new supervision framework was established to address new types of financial risks, such as shadow banking. Foreign shareholding ratio limits were lifted for commercial banks, life insurers and insurance asset management companies, securities companies, futures companies, and fund management companies. Furthermore, foreign investors were allowed to participate in various segments of China’s financial sector, including bond rating and private pension fund management.

36. In the telecommunications sector, China granted 5G licences to its three major telecom operators and a broadcasting company. At the same time, the authorities put in place strategic plans for an integrated development of 5G and industrial Internet. Several regulations, administrative measures, and technical specifications were adopted or published for public comment, with a view to fully implementing the 2017 Cybersecurity Law. The E-commerce Law was passed during the review period to regulate business activities of selling goods and/or providing services through information networks such as the Internet.

37. The State continues to have major presence in maritime and air transport. Developments in the maritime transport sector since 2018 have included continued measures to encourage qualified Chinese-funded international “Flag of Convenience” ships to return to China and a lifting of restrictions on foreign investment in international shipping and international shipping agency services in China. As is the case for other economies, the COVID-19 pandemic has had a big impact on the air transport sector, with international and domestic passenger flights dropping dramatically from February 2020; only the domestic passenger flight segment has recovered. China has taken various measures to support the air and maritime sectors in the wake of the COVID-19 outbreak.

Sources: Executive Summary and Full report

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