China's processing trade has rolled along a fast and sound track this year, achieving volume increases, structural upgrades and better use of foreign funds.

However, experts urged Chinese processors, who manufacture goods for foreign clients from imported materials, to pay more attention to added value, and research and development.

The processing trade volume reached US$289.3 billion in the first seven months of the year, up 36.7 percent on a yearly basis. In terms of volume, it remains the backbone of China's imports and exports, accounting for 46.4 percent.

The sector also witnessed more machinery and high-tech products produced and exported.

And the processing trade sector continues to be a major magnet for foreign investment that China still counts heavily on for fueling its economy.

Foreign-invested companies notched up a processing trade volume of US$236 billion from January to July, representing more than 80 percent of the total.

This should be attributed to the country's inexpensive but quality labor pool and an improving investment environment, which makes foreign investors willing to place their manufacturing chains in China, said Fan Ying, a professor at China Foreign Affairs University.

"Currently, China still has labor advantages compared to its southeastern neighbors, as its workers are comparably skillful," she said.

More importantly, China's ongoing opening up under the World Trade Organization and improvement of investment environment have been a big lure to foreign investors, Fan said.

However, processors should strengthen research and development to increase the added value of the products.

"At present, some Chinese processors are still satisfied with earning money in conducting simple processing," Fan said. "This should be rectified."

And new promotion policies that encourage high-added-value processing activities should be considered.

(China Daily September 6, 2004)