As the top trader in goods, China is making great strides in trade facilitation. Since last year, the country has launched additional measures such as the Plan to Improve Port Environment for Trade Facilitation, Notice on Further Streamlining Customs Clearance, and Detailed Rules of Implementation on Further Promoting Pilot Foreign Exchange Administration Reform Within the China (Shanghai) Pilot Free Trade Zone (4.0). On 26 August, the State Council issued the Master Plans for China Pilot Free Trade Zones in Shandong, Jiangsu, Guangxi, Hebei, Yunnan, and Heilongjiang. The expansion of free trade zones has taken trade facilitation to a new level.
Single-Window System for Faster Clearance
“As an important measure to improve the business environment at ports for trade facilitation, the application of the single window system has been very fruitful.” According to Zhang Xiaotao, Director of the Institute for Finance and Economics, Central University of Finance and Economics, and member of the Expert Committee of the China Council for the Promotion of International Trade, the system has reduced required documentation, streamlined the process, improved efficiency, lowered cost, and integrated data. With reduced bureaucratic formalities and faster customs clearance, trade is more convenient than ever. Statistics from the General Administration of Customs (GAC) show that the clearance time for import and export were reduced by approximately 56% and 61% in 2018, higher than the goal of one third.
Starting on January 1, 2019, the single-window system allows international ships’ single declaration to be shared by multiple authorities. Under GAC’s guidance, Shanghai Port, Tianjin Port, and other major ports are setting time limits for facility service providers on in-facility transport and container placement. Inspection notifications will be fed to importers, exporters, and facility operators, to make clearance time more predictable.
According to Bai Shi, Deputy Director of the National Office of Port Administration, the single-window system enables clearance authorities to work in parallel. This eliminates the trouble of visiting multiple authorities and prevents repetitive declarations. This one-stop system for access, submission, inspection, tracking, and application effectively cuts the costs, shortens the time, and reduces companies’ burdens.
The State Council requires 100% single-window coverage in cargo, manifest, and transportation declarations by the end of 2019. To lower the compliance cost in import and export, under the leadership of the Ministry of Finance, the Ministry of Commerce (MOFCOM), GAC, National Development and Reform Commission, Ministry of Transport, State Administration for Market Regulation co-founded the steering group on port surcharge cleanup. The group has been successful in reducing fees at ports.
In addition, big data also makes clearance easier. Launched in early 2018, the Shanghai Port Cross-Border Trade Big Data Management Platform now accounts for over 40% of all trade in the zone, including over 700 million data entries in production, trade, logistics, taxation, commerce, and foreign exchange. The platform is also seamlessly connected to the single-window system, shipping companies, and port authorities.
Xu Lirong, Chairman of China COSCO Shipping, a member of the pilot program, shared an example. One client declared its goods from the Netherlands two days before their arrival at the Shanghai port and they were released the next day. As documents were submitted for release before the arrival, the client was able to pick up the goods within 20 hours of their unloading. This is much streamlined than before, when declaration and inspection had to be made after the goods arrived, not to mention the additional paperwork for shipping companies and ports.
“Despite the rapid progress, we should not ignore the gap between China and developed countries. We still have room for improvement in customs clearance, international cooperation, and companies’ mutual recognition,” said Zhang Xiaotao. Zhang believed that China should keep up with international best practices, further deepen reforms to delegate power, streamline administration and optimize government services, and strengthen interdepartmental coordination to create a synergy for trade promotion. Specifically, China should extend the single-window coverage from customs to trade management as a whole. Cooperation between industrial associations in civil aviation, port, and railway should also be enhanced.
Financial Innovation for Trouble-Free Trading
“Trade facilitation is a distinguishing feature of free trade zones, to which the reform of customs, inspection, and quarantine authorities is the foremost priority,” said Zhang Guoqing, member of the UIBE Advisory Committee, China Society for World Trade Organization Studies and former Special Commissioner in Shanghai, MOFCOM. Since the founding of the Shanghai Free Trade Zone, customs clearance has become much faster. Multiple approval items or restrictions have been removed, devolved, or transferred. Beijing and Hebei companies, by importing and exporting through the Tianjin Free Trade Zone, can reduce the clearance time to three days and cut the costs by 30%. Zhejiang is facilitating trade across the industrial chain; Hubei is deepening its “fast-track online one-stop application” reform; Sichuan pioneered the “single-document” system for multimodal transport. These measures have drastically improved efficiency and saved transaction and circulation costs.
Guangzhou Customs launched China’s first import and export traceability system in Nansha, Guangdong Pilot Free Trade Zone. “This innovation has not only helped us control our imports—more importantly, it has improved the reputation of our products. Nowadays, many customers ask exclusively for our imports from Nansha,” said Wang Tingting, Deputy Director of Logistics and Supply Chain, Vipshop, a Chinese e-commerce retailer of imported goods. She pointed out that some cross-border e-commerce platforms sold counterfeit commodities to the detriment of their customers. A global traceability system can solve this problem.
This time, China has increased its free trade zones to 18. “The global economic downturn and rising risks are worsened by the US-China trade dispute. To this end, the six new zones from the north to the south will greatly contribute to trade and investment liberalization,” said Liu Ying, research fellow of Chongyang Institute for Financial Studies, Renmin University of China.
According to Liu, the master plans for the Guangxi and Yunnan Free Trade Zones mentioned deepening the cooperation with ASEAN to build new overland and maritime avenues for international trade. However, infrastructure is the bottleneck for such development in the west. Yunnan and Guangxi should step up their infrastructure, and leverage the major thoroughfares and the Belt and Road to connect with Southeast Asia. “This is conducive for transnational economic cooperation and the connection between China and the Indochina Peninsula, and is very important in this era of cross-border e-commerce and new economy. We need to promote institutional innovation, and build new pioneers of reform and opening up. A world-class business environment is not enough—trade facilitation is also indispensable.”
The master plan for the Jiangsu Pilot Free Trade Zone includes: support the lawful establishment of financial entities such as Sino-foreign joint venture bank, private bank, insurance, securities, public equity fund, and licensed asset manager; explore currency exchange facilitation; expand the pilot program of income settlement facilitation for capital account.
“The master plans for the six new zones all involve financial innovation. Financial services can support the facilitation in those areas,” said Liu. Finance is closely connected to trade. As protectionism rises, exporters need greater financial support. China needs financial innovations, such as trade financing and Renminbi internationalization, to support the growth of real economy and push its trade to the next level.