An Exploration On China's Processing Trade

Globalization has become the trend of the world economy, providing greatiopportunities to all countries. With the integration of world economy and the internationalization of production, the worldwide flow of production factors increases rapidly. Under this circumstance, processing trade came into being and became one of the most important parts of International Corporation.Processing trade has developed tremendously in China since the adoption of the policy of opening and reform. It has grown by 243 times with its exports accounting for more than half of China's total exports. Processing trade has helped optimize the industrial structure and increase the foreign exchange reserves. It could be said that processing trade has strongly supported the development of China's foreign trade and is one of the main drives of the development of the economy.However, the controversy over processing trade never stops. On the one hand,' processing trade brings equipment, technologies and industries from developed countries and regions, creating a great number of job opportunities and absorbing foreign capitals and funds. On the other hand, some processing trades are considered as washed-out industries from developed countries, earning a little profit while creating great trade frictions. This problem not only makes many scholars wonder whether processing trade should be encouraged, but also forces Chinese government to change the policy of processing trade frequently. However, it is proved that being the most important component of China's foreign trade, processing trade plays an important role in both the national economy and the long-term development strategy. Therefore, it is quite necessary to analyze processing trade systematically and comprehensively.This thesis tries to analyze processing trade considering both macro-environmentand micro-factors. From perspective of macro-environments, processing trade is the result of globalization. Internationalized production requires the free flow of productive factors without limitation of boundaries and territories. Thus it relies on the modes of processing trade and offers necessary conditions as well. In terms of micro-factors, processing trade is mainly realized by multinational corporations (MNCs). With the growth of economic scales and the implementation of global strategies, more and more multinational corporations prefer outsourcing and Foreign Direct Investment, which are often in forms of processing trades. In this sense, globalization and MNCs are promoting the boom of processing trade and will continue to do so in the future.Focusing on China's processing trade, this thesis aims to make an exploration on the potential opportunities of processing trade in China. First, considering the advantages of labor costs and geography, the author argues that China is suitable for processing trade. Second, China's long-term strategy and national economy growth needs processing trade to create job opportunities, optimize industrial structure, develop western and northeastern regions, and absorb foreign funds. Finally, in the global context the world economy on the one hand cannot grow healthy without the participation of China, and China on the other hand cannot afford being excluded from the international division of work and the world economic system. Obviously, processing trade can contribute to the realization of these goals. The thesis presents a comprehensive assessment on processing trade from its possibility to necessity, from the internal demands to the external forces.The last part of the thesis discusses the existing problems in China's processing trade and gives some suggestions. Firstly, processing trade plays an important role in the development of China; therefore, it is necessary for the government to enact favorable policies to create an attractive environment. Secondly, the problems with processing trade could not be ignored and should be solved by close supervision. Inthe past 20 years, Chinese government has paid great attention to it aiid has made some progr...