Recruiting in China

The adjustment of customs duties that is to take effect tomorrow marks a significant change in the way China prioritizes its trade sector.

As a fast-developing economy, China has benefited tremendously from its export-led growth during most of the past quarter of a century. However, no longer will the country put trade growth before everything.

The Ministry of Finance recently announced that the country decided to impose temporary tariffs on 110 exported goods and cut tariffs on 58 imported products since the beginning of November.

Clearly, this move shows that the Chinese authorities now attach more importance to external trade balance and domestic industrial restructuring than merely double-digit trade growth.

On the one hand, the hike of export taxes and the cut in import duties will definitely put a drag on the country's soaring trade surplus.

Along with China's rise as a global manufacturing power in recent years, value-added processing trade fueled by an accelerated inflow of foreign direct investment has hugely inflated the country's trade surplus.

In the first nine months of this year, the country's imports and exports increased by nearly one-fourth to hit US$1.27 trillion, generating a trade surplus of US$109.85 billion. This three-quarter net export exceeded that record-high annual trade surplus of US$102 billion in 2005, which had already more than tripled the US$32 billion in the previous year.

Given intensifying trade tensions with major trade partners like the United States and the European Union, which suffer a huge trade deficit with China, it is fairly reasonable for the Chinese Government to rein in the rapid growth of the trade surplus.

Such efforts will both help reduce imbalances in global trade and ease pressure a soaring trade surplus and inflow of foreign investment exert on the country's monetary policy. The Chinese central bank has been trying to squeeze the credit supply to cool down economic growth, but a ballooning foreign exchange reserve has kept pumping liquidity into the domestic market.

On the other hand, by controlling the export of goods, the production of which involves the mass consumption of energy and resources as well as heavy pollution, the Chinese Government is sending a clear-cut signal to domestic industries that they must bid farewell to the extensive growth pattern for now.

In the past, as long as the trade sector could serve as a growth engine by creating jobs and a trade surplus, local governments did not pay much attention to the environment and resource costs of extensive trade growth.

Nonetheless, as the country is shifting away from a growth strategy that stresses speed towards a new one that focuses on sustainability, the country's trade pattern also needs to undergo a fundamental change.

A customs duty that discourages energy-and-resource-intensive export is a needed step to push domestic enterprises to raise their energy efficiency and environmental awareness.

China Daily