China will ban processing trade in more categories of chemical and resource products in the latest move to restrict the export of resource-intensive products and to balance trade.

 

The 2007 Prohibited List for Processing Trade, which will take effect on April 26, bans processing trade firms from dealing in 990 products.

 

There are 186 new categories listed, including heavy diesel oil, apatite and lanthanon ore. They are mostly non-renewable resources, energy-consuming and high-polluting products.

 

Most of the newly added products fall within the categories for which export tax rebates were scrapped or lowered, according to an official with the Ministry of Commerce who did not wish to be named.

 

"It reflects the fact that China does not encourage exports of these products," he said.

 

The prohibition was jointly released by the commerce ministry, the General Administration of Customs and the State Environmental Protection Administration. The government has updated the list every year since 2004.

 

Processing trade, in which Chinese manufacturers add value and re-export, is a major source of China's widening trade surplus. Although the surplus is included in China's figures, the profit goes to foreign investors.

 

The government's moves to control processing trade have had a preliminary impact this year, according to Customs. The processing sector's imports and exports accounted for 45.4 percent of the country's total trade in the first two months this year, down 2.8 percentage points from a year ago.

 

But the processing trade surplus still amounted to $34.57 billion in this period, while the total trade surplus was $39.64 billion.

 

Apart from controlling processing trade, the Chinese government is also reportedly preparing to cut or scrap export tax rebates on extra categories such as high-purity refined zinc, garments and more iron and steel products.

 

Vice Minister of Commerce Gao Hucheng said last month that the introduction of measures to slow down export growth was likely to spur exports in the short term as exporters rushed to fulfill contracts, so the impact on the trade surplus would be delayed.

 

(China Daily April 7, 2007)