Trust the process
The central government just rolled out support measures for a slightly arcane category of trade that could make a big impact on business.
On Friday, the commerce ministry (MofCom) and nine other agencies published guidance on upgrading processing trade.
ICYDK: Processing trade is when raw materials, intermediate goods, or finished products in need of repair are imported into free trade zones (FTZ) or bonded areas to be processed, assembled, or repaired within China, and then re-exported – all without incurring customs duties and VAT.
Get this: As of 2021, processing trade accounted for 21.7% of China's total foreign trade by value (Customs).
The guidance puts forward 12 measures aimed at "improving the development level" of processing trade, which broadly seek to:
- Encourage processing trade in higher value-add sectors, including electronics, biomedicine, aerospace, new energy, and new materials
- Support the use of processing trade to conduct repairs on ultra-high value equipment like aircraft and ship engines and medical devices
- Encourage the expansion of processing trade in less developed regions, including along China's land borders
- Greatly increasing policy support to processing trade via tax breaks, credit, targeted subsidies, preferential electricity tariffs, logistics upgrades, and more
Get smart: Moves like these will make China even more central to global trade, further complicating Western efforts to "de-risk" from China.