The Influence of China Export Processing Zone on China's Export Trade

China's processing trade shows the trend of continuous extension of industrial chain and increasing value-added rate. However, due to some policy and institutional obstacles, the process of realizing this trend still faces many difficulties. On the basis of expounding many negative effects caused by the short processing trade industrial chain in China, this paper deeply analyzes the main reasons of the above phenomenon, and then puts forward relevant countermeasures to promote the extension of China's processing trade industrial chain and improve the value-added rate.

The industrial chain of processing trade reflects the process that processing trade enterprises change from single enterprise processing to multi-enterprise production consortium deep processing through deep processing carry-over, outward processing and domestic supply of raw materials and parts, and gradually form deeply related and mutually supporting industrial clusters, and then continuously realize value-added. This process includes R&D design, processing and production, transportation and storage, logistics and distribution, marketing and after-sales service. For a country, the more processing links left in domestic processing trade and the longer the industrial chain, the higher the domestic value-added rate (hereinafter referred to as "value-added rate"), which is more beneficial to the development of national economy. With the rapid development of China's economy and the improvement of its investment environment, processing trade has gradually shown a trend of continuous extension of industrial chain and increasing value-added rate. However, due to some policy and institutional obstacles, the process of realizing this trend still faces many difficulties.

First, the value-added rate and "smile curve" in the processing trade industry chain

The link distribution of processing trade industry chain can be analyzed by "smile curve" (as shown in figure 1). This theory describes that at the left end of the curve (upstream of the industrial chain), with the input of R&D and design, the value-added income of products gradually rises; At the right end of the curve (downstream of the industrial chain), with the establishment of brand operation and sales channels, the value-added income of products has also increased significantly; The manufacturing industry, which focuses on finished product assembly and low-end products, is "more sweat and less money", with low technical content, less added value of products, fierce market competition and easy to be replaced by peers with lower costs. This is obviously the case for most processing trade enterprises in China.

This upward curve is very similar to the mouth shape when smiling, so it is called "smile curve". The "smile curve" in the processing trade industry chain is actually a "value-added rate (added value) curve", that is, the value-added level of technology, manufacturing and scale can be improved through new product development, brand creativity, marketing channels and operational capabilities, that is, more value can be created by infiltrating into both ends of the "smile curve".

At the bottom of the "smile curve", the value-added rate of China's processing trade products is always low, while the value-added benefits of upstream and downstream industrial chains controlled by foreign investors are often ten times or even hundreds of times that of domestic processing trade enterprises. For example, every DVD exported from China costs only $39, but it has to pay an average of 19.7 to foreign companies. Key components such as movement and decoder, which account for 70% of the cost, should be imported, and export products should be labeled with foreign-owned trademarks. This is not a special case. From a pair of shoes to a CD, from a shirt to a Christmas tree, almost all the export products of China's processing trade are telling such a distribution story. More seriously, the "smile curve" is still steepening (as shown in Figure 2).

The bottom of the "smile curve" of China's processing trade is deepening day by day, which reflects that China's labor force is increasingly at a disadvantage in terms of relative price (i.e. terms of trade) in technical exchanges with developed countries. For example, from 200/kloc-0 to 2005, the value-added rate of processing trade in China was 56.8%, 45%, 47%, 46% and 52% respectively. The data shows that the value-added rate of China's processing trade fluctuates. The expansion of processing trade output has not brought about the increase of value-added income, and China is falling into the "smile poverty" trap of processing trade. In 2005, with the general increase in international and domestic prices of energy and raw materials, nearly one third of the top 200 commodities in China's processing trade increased in export volume and decreased in price.

Second, the main problems faced by the value-added rate of China's processing trade industry chain

1980, the total import and export of China's processing trade was only1600 million US dollars, and it increased to 6905 1 000 million US dollars in 2005, an increase of 4 1.2 times, accounting for the total import and export of the whole year (1421. Processing trade has become the largest export mode in China, which plays an important role in promoting the development of China's national economy. However, due to the short domestic industrial chain and low added value rate of China's processing trade, the related negative effects are also very prominent.

(A) the domestic processing trade supporting capacity is insufficient, lacking long-term development potential

China's processing trade capacity is mainly concentrated in the low-end manufacturing industry, parts and raw materials are excessively dependent on imports, and domestic supporting capacity is insufficient. The only supporting products are mostly foreign-funded enterprises. According to the survey, Suzhou's processing trade mainly depends on the transfer of processing and assembly industries in Taiwan Province and Hongkong. After more than ten years of rapid development, the total import and export volume of processing trade in 2005 has reached 1073 billion US dollars, accounting for 15.5% of the whole country. But at present, the main advantages of Suzhou's processing trade are more reflected in the total product (value). For example, in 2005, Suzhou * * exported15.97 million notebook computers, valued at10.9 billion US dollars, accounting for about14 of the global trade volume. However, these "made in Suzhou" notebook computers are almost all OEM. Assembly spare parts are mainly purchased and allocated by multinational groups, so it is difficult for domestic enterprises to enter the supporting system of materials and parts, and the independent extension ability of the industrial chain of processing trade enterprises is weak, the profit control ability is poor and the value-added income is extremely low. In fact, most of the industries developed by processing trade in the eastern coastal areas of China have similar problems.

(B) China's processing trade has been at the low end of the industrial chain for a long time, lacking sustainable profit margins.

China's processing trade has developed rapidly, mainly concentrated in labor-intensive industries, including textiles, clothing, shoes, furniture, mechanical and electrical products, etc. In recent years, IT has sprung up in the fields of electronic products and IT. Although emerging industries are capital-intensive and technology-intensive, domestic processing enterprises only engage in labor-intensive links. This model may exist for a long time, but the profitability is difficult to sustain. The challenge comes from the effect of "cheap grain hurts farmers", that is, industries with international comparative cost advantages are often industries with sufficient or even surplus supply, and generally maintain their competitive advantage with "three lows" (low cost, low price and low grade). Although the price is competitive, if the trade increment does not increase or even decrease, the value-added rate of products will be lower and lower, and trade sanctions will be incurred because of the suspicion of dumping products at low prices. Moreover, processing enterprises do not grasp the final overseas sales channels, and it is difficult to understand the ever-changing market and product demand, which leads to the loss of new product R&D and design capabilities and vague guidance. Under the opposite compression of the upstream and downstream links in the industrial chain, processing enterprises are forced to strive for perfection in the superior links, or simply engage in "takenism", and the upstream enterprises produce what they provide (samples) instead of research and development. This mode of production will inevitably lead to the marginalization of industrial links and the reduction of value-added rate. At the same time, because there is no final sales channel, we can't grasp the pricing power of products. The larger the export scale, it often means that the larger the buyer's order, the stronger the buyer's bargaining power and the lower the value-added rate. In such a vicious circle, enterprises can continuously expand the scale of production capacity, but the links in the industrial chain are solidified and the space for value-added rate is compressed.

(3) The value-added rate of processing trade is very low, and a large amount of profits are flowing out.

In the industrial chain consisting of R&D, design, manufacturing, logistics, sales and service of the whole processing trade, Chinese enterprises often engage in labor-intensive links such as initial processing, assembly and assembly of parts or raw and auxiliary materials, and the technical content in the industrial chain is low, which leads to little increase in value-added rate. According to statistics, at present, Chinese enterprises can only earn about 5% of the total export revenue in the processing of incoming materials, and most of the value-added products are obtained by foreign parties; In feed processing, because the foreign party controls the key links of the industrial chain, such as raw material procurement and finished product sales, it is convenient to use transfer prices and other means to lose a lot of profits. For example, a Barbie doll made in China, domestic processing trade enterprises only get 35 cents, while foreign enterprises such as the United States get 20 dollars.

(D) The processing trade industry chain is short, which has a weak driving effect on related industries.

At the present stage, the most prominent manifestations of China's processing trade are "two ends are outside" and "big entry and big exit". The processing trade mode of "two ends in the outside" will inevitably lead to a large number of imports of raw materials, which will have a negative impact on the development of domestic related raw material industries; Under the mode of "big import and big export", because foreign businessmen control the core technology and sales channels, China only participates in simple processing links, which leads to the real business subject of China's processing trade is foreign businessmen rather than domestic operators, thus making China's original industrial base unable to fully play its role, and the radiation ability and agglomeration effect of processing trade have not been fully released. Moreover, at present, many processing trade is still in the development stage of "one in one out, one single process", and there is a general lack of leading enterprises and supporting cooperative enterprises with strong driving force, and the degree of product processing is not deep, which has no significant effect on industrial upgrading and product substitution. At the same time, in order to maintain technological superiority and obtain high profits for a long time, foreign investors often take measures such as abusing intellectual property protection and provoking price wars of domestic enterprises, which hinder or split the formation of domestic industrial chains and delay the driving role of processing trade in China's industrial development.

Three, the main factors affecting the extension of the processing trade industry chain and the improvement of value-added rate

The 11th Five-Year Plan of the Central Committee puts forward that "we should continue to develop processing trade, focus on upgrading industrial level and processing depth, enhance domestic supporting capacity and promote domestic industrial upgrading". However, at present, the extension of China's processing trade industrial chain and the improvement of value-added rate are restricted by many factors.

(A) the supply of human capital is very scarce.

In today's economic globalization, especially when capital elements can flow freely, what a country can do in the international industrial division of labor mainly depends not on the richness of financial (physical) capital, but on the difference of human capital (reflected in the richness of knowledge and skills rather than the number of people), because financial (physical) capital can be introduced, but the flow of people is restricted by immigrants. Therefore, no matter according to the comparative advantage principle of international division of labor or the "smile curve" principle of processing trade, we can draw the conclusion that countries with rich human capital can make high-end parts with high value-added rate in the industrial chain, while countries with serious shortage of human capital like China can only make low-end parts with low value-added rate in the industrial chain. Because the popularization rate of vocational education and higher education in China is very low, the supply of human capital is very scarce, and simple skilled labor (human resources) without good education can be supplied in large quantities, so it lacks comparative advantages and competitiveness in the high-end (upstream R&D) and middle-end (upstream technology development, design and downstream marketing) fields of the international division of labor industry chain; Even in the intermediate processing and manufacturing of low-end parts, the labor productivity of China is only 4. 1% of Japanese, 4.4% of American, 5.6% of German and 9.8% of Korean, and the industrial added value rate is only about 26%, while that of developed countries is 40%-50%.

(B) the competitive advantage of domestic products is insufficient

First of all, the quality of domestic products is unstable. The management level and production technology of many domestic enterprises are still relatively backward, which leads to unstable product quality and cannot meet the requirements of processing trade enterprises. Secondly, the international marketing channels of most enterprises in China are not smooth, which makes the international popularity of many products in China very low. However, most enterprises engaged in processing trade in China have identified suppliers of raw materials and parts in their development and design, and the development and design are mostly carried out overseas, while foreign designers know little about our domestic products, so they designate processing trade enterprises to use raw materials and parts produced abroad. At the same time, many domestic products have defects such as high price, delayed delivery and lack of transportation guarantee, which weakens their domestic supporting ability in processing trade.

(C) the lack of core patented technology and independent brands

According to China National Intellectual Property Administration's data, 99% of enterprises in China do not have their own patents, only 40% have trademarks, and only three-tenths of enterprises in China have independent intellectual property rights of core technologies. Many enterprises "have manufacturing but not creation, knowledge but no property rights"; Among the invention patent applications in China, 82% are from abroad, with high technology content; Applications from China account for 18%, with low technical content. "82%:18%" highlights the difficulty in extending the processing trade industrial chain. However, when some domestic enterprises with independent brands "borrow ships" to enter the international market or get into operational difficulties, they often choose the "convenient" way of exchanging excellent production capacity for foreign OEM orders. Since then, independent brands are usually "refrigerated" by foreign investors. Only when domestic enterprises gain a firm foothold and strive to enable independent brands to enter the international market independently, do they find that the foresight of banning foreign brands has long been forgotten in the new market, and the downward extension path of the industrial chain is blocked. The technical barriers in the upstream of the industrial chain and the trademark control in the downstream of the industrial chain make domestic processing enterprises only survive in the cracks, and the value-added rate has become a pair of "small shoes" specially made by foreign businessmen. Domestic enterprises can neither "barefoot" enter the international market, and it is difficult to wear "little shoes". For example, the high patent fees and rising technical barriers make China's DVD, mobile phone, digital camera and other industries short-lived, and soon they are submerged in the whirlpool where the value-added rate drops sharply.

Policy restriction

In recent years, in the adjustment of processing trade policies, various departments often pay more attention to how to prevent illegal enterprises from "smuggling" and "defrauding tax rebates" by using processing trade policies, and pay less attention to the fundamental policy goal of how to encourage processing trade to extend the domestic industrial chain and improve the value-added rate, so as to improve its contribution to the national economy.

1. Indifference policy promotes rootless industries. China's current policy does not treat the technical level of processing trade differently, but gives preferential treatment to simple processing trade and processing trade of high value-added and high-tech products indiscriminately, which can not well reflect the spirit of the national industrial policy, and is not conducive to the development of China's processing trade in the direction of extending the industrial chain and improving the value-added rate and technical content. Objectively, foreign businessmen are also encouraged to carry out "short, flat and fast" rootless processing by means of "big in and big out" and "fast in and fast out".

2. There are efficiency obstacles in deep processing carry-over. Due to the difficulty of physical supervision, it is theoretically supported to use domestic procurement to extend the processing trade industrial chain and improve the value-added rate, but there are many policy and operational constraints in reality. For example, at present, China's deep processing carry-over is mainly from manual to manual, which is inefficient, especially not suitable for processing trade with various parts and complicated purchase and sale channels.

3. The traditional regulatory concept has formed a policy bottleneck. Regardless of high-end industries or traditional industries, R&D, design, marketing and follow-up services in the industrial chain have the greatest value-added potential, so they are also the focus of competition among countries in the international division of labor. However, the traditional concept of supervision in China holds that the object of supervision should be tangible materials and enterprises engaged in processing trade should have production capacity. The industrial policy of processing trade formulated on the basis of this seemingly reasonable theory has seriously failed to adapt to the current development trend of industrial chain outsourcing, which has restricted the transformation and upgrading of processing trade. For example, IT and IC industries, which have become the leading industries in the southeast coastal areas of China, have a strong demand for integrated circuit design and software development industries in the upper reaches of the industrial chain and maintenance and testing industries in the middle and lower reaches, but the existing restrictive regulations have broken the key links between upstream and downstream enterprises.

4. Reverse incentive of export tax rebate policy. In the field of processing trade, there are many uncoordinated and uncoordinated export tax rebate policies, which makes China miss the export opportunities of hundreds of billions of dollars of supporting products every year. First, the current tax system has increased the tax burden of processing materials. Processing enterprises only charge processing fees when exporting products, and their domestic purchases are not regarded as exports, so they cannot enjoy the export tax rebate policy, and the enthusiasm of domestic suppliers is not high. Second, inter-departmental policies and measures are not coordinated. At present, the customs will write off the processing trade goods exported to processing zones, bonded zones and bonded logistics centers as actual exports. However, the tax authorities only agree to refund taxes to export processing zones and bonded logistics centers, which hinders the extension of the processing trade industrial chain to domestic related industries such as warehousing and transportation, and inhibits the increase of value-added rate. For the carry-over business of deep processing, the manual verification by the customs is regarded as the actual export, but the tax authorities can only give the tax refund after the actual export, which objectively leads enterprises to adopt the way of "one-day overseas tour (bonded logistics center)", sacrificing logistics costs in exchange for export tax refund, and the value-added income is wasted for no reason. Third, there is a phenomenon of "super national treatment" for imported materials and parts. Materials imported by processing trade enterprises can be exempted from customs duties and import link taxes, while domestically purchased materials can only enjoy partial tax rebates (17% and 13% tax rebates). In this case, many enterprises that originally used domestic materials also turned to imported materials. Fourth, R&D investment does not enjoy export tax rebate.

Four, China's processing trade industrial chain extension and value-added rate improvement countermeasures.

The Third Plenary Session of the 16th CPC Central Committee called for "continuing to develop processing trade, attracting multinational companies to transfer processing and manufacturing links and R&D institutions with higher technical level and greater added value to China, and guiding the transformation and upgrading of processing trade". In view of the above problems, the government can consider taking the following measures to promote the extension of the processing trade industrial chain, improve the value-added rate of processing trade as a whole, and give full play to the driving role of processing trade in related industries, so as to realize the transformation and upgrading of processing trade.

(A) improve the institutional environment and promote the development of processing trade

The extension of domestic industrial chain of processing trade is directly proportional to the system cost and the probability of risk environment. Therefore, while taking measures to promote the extension of the processing trade industrial chain and increase the value-added rate, we should constantly improve the institutional environment.

1, improve the efficiency of supervision. In order to speed up the transmission of parts and raw materials in the processing trade industrial chain, shorten the production cycle of processing trade enterprises and enhance their international competitiveness, it is necessary for the relevant departments of our country to greatly improve the supervision efficiency of processing trade enterprises and implement multi-sector networking supervision.

2. Improve the functions of the two districts. Promote the functional integration and policy superposition of various special regulatory areas. Give full play to the storage function of the bonded area and give the products delivered by the bonded area warehouse the qualification of export tax refund; Superimpose bonded logistics functions in export processing zones as soon as possible, and support the establishment of regional distribution centers and procurement centers in the two zones; Break the policy bottleneck encountered by processing trade R&D, maintenance and other industries, promote the extension of industrial chain, and improve the actual attraction of the two places.

3. Strengthen vocational training. The government and enterprises should gradually establish a mechanism conducive to the growth of skilled workers, the education department should make greater efforts to train more skilled workers, and the tax department should give tax-free concessions to enterprises' labor training fees, so as to reverse the surplus of low-level white-collar workers and the shortage of skilled workers in China as soon as possible, and strive to build a contingent of skilled workers who can improve the manufacturing level in China.

4. Clarify the industrial direction. According to the needs of China's industrial structure adjustment and the development direction of international industries, we will adjust and refine the industrial guidance catalogue of processing trade and the classified catalogue of commodities and enterprises, cancel some preferential policies for enterprises engaged in simple processing trade, encourage domestic enterprises to enter the links with high added value and high technology content in the international industrial chain, and promote the evolution and upgrading of the industrial structure of processing trade from "three lows" to high processing degree.

5. Achieve technological leapfrogging. Gradually establish a scientific research and development network system adapted to the development of processing trade, develop major technologies with independent intellectual property rights, and fundamentally improve the technical level of manufacturing industry. Cultivate China brand through market competition and accelerate the development of key industries with strong industrial relevance, strong driving force and large market space; Cultivate emerging industries with great market potential and high added value, and promote the transformation and upgrading of China's processing trade.

(2) Improve the localization rate of processing trade materials.

Starting from the goal of maximizing enterprise profits, processing trade enterprises still hope to reduce costs and improve market competitiveness through the localization of materials and parts. In order to improve the supporting export of domestic materials and parts, relevant policies can be adjusted from the following aspects:

1, determine the scientific industrial policy. For a long time, the backward production development of domestic upstream industries (including basic industries such as machinery, electronics and chemical industry) has not been solved, and the national policies such as price, investment, taxation and loans are almost all inclined to the downstream final product industries. Therefore, it is difficult to realize the import substitution of processing trade materials without fundamentally reversing the trend of low-end manufacturing.

2. Open the bottleneck of relevant policies. Actively study and solve policies and measures that are not suitable for encouraging the localization rate of processing trade products, solve the problems of deep processing carry-over and tax refund for processing trade enterprises using domestic raw materials and parts as soon as possible, and reduce or exempt some taxes for processing trade using domestic materials instead of imported materials, so as to encourage the enthusiasm of processing trade enterprises for domestic procurement.

3. Increase financial support. In order to make the materials produced by domestic enterprises meet the requirements of processing trade export in terms of quality, specification and cost, the state should provide funds to support domestic enterprises to develop new products or provide trial products to users; Encourage the establishment of private "risk financing" mechanism, encourage enterprises to set up "risk funds" through tax reduction and exemption, and invest in high-risk new product development and trial-production projects.

4. Establish a supply and demand information network. The state should implement supporting policies, establish domestic material information database and information network for alternative products in processing trade, and timely announce the quality standards, specifications, prices and supply channels of products; At the same time, through various channels, domestic material production enterprises are publicized and displayed overseas.

(3) Encourage domestic enterprises to cooperate with multinational companies.

The successful experience of "Four Little Dragons" in Asia shows that the supplier group with domestic enterprises as the main body is an important guarantee for processing trade to avoid "enclave effect" and realize transformation and upgrading. Therefore, we should promote domestic enterprises, especially private enterprises, to integrate into the supporting system of processing trade on the basis of existing industries. The following specific measures can be taken:

1, the implementation of income tax concessions. Where domestic-funded enterprises provide supporting services for processing trade (including information, science and technology investment and other services) and reach a certain proportion of their sales (such as 30% or 40%), their enterprise income tax may be reduced or exempted.

2. Establish relevant evaluation system. Establishing a notification and evaluation system for domestic enterprises to provide processing facilities for multinational companies and foreign-invested enterprises is mainly a policy orientation for local governments, and it has an effective space to play its role under the current system in China.

3. Create a fair and standardized environment. Effectively solve the specific difficulties such as the shortage of domestic enterprises, especially small and medium-sized private enterprises in borrowing capacity, the lack of information and talents in the international market, the lack of production technology of key parts, and the lack of technology and product renewal ability. In this regard, it is more important for the government to provide a level playing field and create a standardized investment environment than preferential policy competition.

(4) Pay attention to learning advanced foreign experience.

Singapore has a successful experience in using processing trade to realize domestic industrialization. Since the 1960s, Singapore has introduced processing trade. At that time, Singapore had raised many questions about whether to develop manufacturing industry. Later, after exploring Singapore, we found a way to realize industrialization by using and developing processing trade. At that time, Singapore had a port advantage and was close to countries rich in natural resources such as Indonesia and Malaysia. Using these advantages, we can introduce foreign capital to develop processing trade, expand exports and promote economic growth. To this end, Singaporeans have made a big fuss in the field of intermediate processing, which has gradually evolved the processing trade from a state of large at both ends and small in the middle to a pattern of large at both ends, gradually transforming foreign industries into industries rooted in the local area, prolonging the industrial chain and improving the value-added rate. As a result, Singapore's economy has achieved great success, realizing the dream of industrialization and the goal of strengthening the country and enriching the people. The above experience is worthy of further study and reference in China. Of course, China is a big developing country with characteristics different from those of a small country. The experience that a few multinational companies can achieve substantial economic development cannot be completely copied to China, but we should also learn and absorb it selectively.