This paper analyzes Mainland China’s export system. In the first part, a survey of the organization and structure of Mainland China’s export system is presented, with emphasis on recent reforms that have been made, in particular the reform beginning in 1979. The second part describes export business practices in Mainland China. The contents of this paper together with conclusions may be summarized as follows.
First, until 1979, Mainland China’s policy was to adopt a centralized export system in which all export business was conducted by the Ministry of Foreign Trade and state-owned foreign trading companies. Although such an approach may be necessary and also convenient in the case of trade with other communist countries or else where the total value of exports is relatively small and there is only a limited range of commodities involved, the situation becomes much more complex as the number of commodities and trading partners increases. This has been the case in recent years in Mainland China, particularly since the “open-door economic policy” was adopted in 1979, with the resultant dramatic increase in the value of exports. As the existing export system could no longer cope with the upsurge, it was reformed in 1979.
Secondly, the chief measures adopted in the reform were: (1) to reshuffle the trade administration organizations; (2) to give local government and certain firms the right to export; (3) to adopt various measures to encourage exports, including the retaining of some foreign exchange by firms out of foreign exchange earnings, tax rebates and a system involving multiple exchange rates; (4) to adopt other measures to promote exports such as compensation trade and the installation of special export zones; (5) to use an export licensing system to administer the whole of the export sector in order to prevent price competition among exporting firms; (6) beginning 1985, to change the business practice of exporting certain commodities from one in which the trading company buys directly from the manufacturer to one in which the trading company acts as an agent on behalf of the manufacturer; (7) to separate the administrative from the business activities of the export enterprises; and (8) to narrow down the scope of planning.
Thirdly, the activities in which the export business practices were to be engaged were to include the buying and allocating of commodities for export, pricing policy, signing contracts, the examination, transportation and insuring of export commodities, and arbitration in the case of disputes involving exports.
Finally, in spite of the reforms in her export system, owing to the problems existing in the economy, it was highly unlikely that Mainland China could carry out the reform successfully. Such problems included: (1) the. difficulties involved in separating the administrative from the business activities of the export enterprises; (2) the shortcomings associated with the trading company’s buying directly from the manufacturer, and the difficulties involved in executing policies related to the situation where the trading company acts as the manufacturer’s agent; (3) the shortages that would result if a mandatory buying plan were not introduced in the case of commodities which incurred losses when exported; (4) a lack of promotion of the measures proposed in the reform, or where they had very little effect; (5) a failure to realize that “the cost of earning foreign exchange” is not a proper index for measuring the gains and losses from exports; and (6) the inability of the export licensing system to solve the problem of interfirm competition more efficiently.
