Processing Trade And Its Development In China

Since the execution of opening-up policy, China's economy has got great development, in which processing trade plays an indispensable role. Processing trade not only realizes its own development, but also brings about the growth of the whole China's economy and the earth-shaking change of the whole economic structure. Processing trade absorbs a great majority of labor surplus in the countryside, which not only resolves the employment problem, increases income level in the countryside, but also benefits to the construction of a stable society. Processing trade draws a great amount of foreign capital, with which many manufacturing industries import advanced technologies and machinery; consequently, these industries improve product quality and competitiveness, bring out high-tech products, and change China's foreign trade structure. Processing trade itself has realized upgrading, at the same time, it also upgrades the whole industrial structure. The advanced production technologies and management modes, executed by processing trade have a radiant effect. Many domestic similar industries gained these high technologies or management modes through learning or personnel transference; meanwhile, many supplying industries also continuously improve their own ability to meet these foreign invested companies' requirements. In one word, processing trade lays a foundation for the emergence of competitive and creative Chinese domestic enterprises.However, with the development of China's economy and the formation of global economic integration, the problems in present processing trade are becoming more and more obvious. First, the prerequisites for the comparative advantage theories are no longer practical in the current condition. On the contrary, government, according to Porter's Diamond, is playing a more and more important role in directing the development of processing trade. Second, the quick growth of China's economy, especially China's foreign currency deposit, which reached US$ 1.0663 trillion at the end of 2006, has aroused some developed countries' revenge. They impose restrictions on China's export, with the excuse of environmental destruction, labor standard or technological standard, and so on. Third, after almost 30 years' development, processing trade per se also shows some problems. Firstly, the amendment of many governmental policies cannot keep up with the requisites brought out by the changes of the international trade. Secondly, there are also some loopholes in supervision. Thirdly, nowadays, human resources, capital, science and technology, rather than labor or basic factors, are playing important roles in production; meanwhile, salaries keep on increasing in China; in consequence, China is losing its traditional comparative advantages. Fourthly, processing trade is still in the lower part of the whole value chain and still has to get the minimum processing fees. Fifthly, processing trade does not get rid of the control of the foreign invested companies. Fourth, in recent years, China's central government also adjusts its policies to build a harmonious society. During this process, many new polices are carried out, which also propose challenges to processing trade. The processing trade companies have to reconsider their production mode, management method, the choice of industry, or even the location to adapt to the new policies, such as, narrowing the gap between coastal region and central and western regions, upgrading the whole nation's industrial structure, and so on.Despite the existence of problems and challenges, China, at present, can not get away from processing trade. However, the core problem is how to develop processing trade in the future. First, coordinate the growth of processing trade in coastal regions and western and central regions: changing the mode of processing trade in the coastal regions; accelerating the movement of processing trade to central and western regions. Second, take the form of counter OEM to strengthen the initiative and gain more stable profits. Third, change the mode of processing trade through improving technology content of the products; emphasizing brand strategy; and transforming from OEM to ODM, and OBM. Fourth, accelerate the development of service processing trade in China. There are many favorable factors to develop service processing trade in China, but the unfavorable conditions should not be neglected. Fifth, enhance the government's directive role and promote the cooperation between banks and companies: the government directs the capable enterprises to go global by the support of the banks; the banks and the enterprises cooperate with each other initiatively in the competitive market.