New Chinese trade policy could boost Indian exports

March 06, 2010 11:01 pm | Updated November 17, 2021 07:16 am IST - BEIJING:

China will, in the coming year, begin to remove some import restrictions and look to boost imports from developing countries, according to a policy statement issued by its Ministry of Commerce on Saturday.

The government would “eliminate unreasonable restrictions” on the import front, the statement said, marking a rare admission by Chinese officials that some of its import tariffs were, indeed, “unreasonable” — a point Indian officials have often made to their Chinese counterparts, most recently in trade talks here in January.

The trade policy, unveiled during the annual convening of China's legislature, the National People's Congress (NPC), is part of the government's larger restructuring plan to make growth less export-reliant and to stimulate domestic demand, officials said.

Chinese exports fell by as much as 16 per cent last year on account of the financial crisis.

The policy statement said “imports from developing countries will be expanded so as to satisfy domestic demand on the one hand, and promote mutual benefits and common development on the other.”

For Indian companies, who have long complained of high import tariffs that have blocked their efforts to penetrate the domestic market, the new trade policy, if implemented, could bring some relief.

Indian exports to China are currently driven by raw materials like iron ore. The trade deficit with China grew to a record $16 billion last year. Minister of Commerce and Industry Anand Sharma said during his January visit to Beijing that he had received some “sincere” assurances from Chinese officials that they would work with India to address the gap.

Subsidy factor

Any optimism Indian companies might derive from the trade policy's new import focus will, however, likely be dampened by a slew of subsidies for domestic manufacturers that have been announced as part of the government's stimulus plan. The subsidies, foreign companies say, will give domestic manufacturers an unfair cost advantage.

Chinese Commerce Minister Chen Deming said on Saturday that recently announced import incentives had already led to a 50 per cent drop in China's trade surplus in the first two months of this year from the same period a year earlier. He also defended the subsidies, saying the stimulus incentives “abide by the rule of the World Trade Organisation and bear no protectionism.”

Mr. Chen was addressing the media on the sidelines of the NPC, along with Zhou Xiaochuan, governor of the People's Bank of China, Zhang Ping, the head of the National Development and Reform Commission, and Xie Xuren, the Finance Minister.

On the question of China's exchange rate, Mr. Zhou hinted the Yuan currency would be allowed to appreciate in the future, even as Beijing has come under growing criticism for under-valuing the Yuan to support domestic exporters. The exchange rate mechanism “will be further improved to keep the exchange rate basically stable at an adaptive and equilibrium level,” the People's Bank of China said in its policy statement for the year.

Mr. Zhou said the Yuan would not indefinitely remain pegged to the dollar. “If we are to exit from these irregular policies and return to ordinary economic policies, we must be extremely prudent about our choice of timing,” he cautioned.

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