Based on the current development situation of processing trade, to support the stable development of processing trade and effectively enhance the stability and competitiveness of the processing trade industrial and supply chains, the Bureau of Commerce of Dongguan City recently issued the “Dongguan City’s Work Plan on Comprehensive Improving Development of Processing Trade” The Plan includes 10 specific measures, briefly referred to as the “Dongguan’s 10 Measures for Processing Trade”.
Reporters have sorted out that the new policy includes areas such as capital expansion, equipment renewal, product updates, expanding into emerging markets, developing new bonded business formats, and integrating domestic and foreign trade. There is policy support as well as tangible financial subsidies, making it truly substantial and valuable.
Dongguan is one of the earliest regions to develop processing trade and is hailed as the “Capital of Processing Trade.” As the birthplace of the first processing trade enterprise in China, Dongguan is considered an important indicator of China’s foreign trade. The latest data from the Bureau of Commerce of Dongguan City shows that from January to April this year, Dongguan’s processing trade imports and exports amounted to 114.07 billion yuan, an increase of 5.3% compared to the same period last year. In April alone, there was an 8.4% increase.
The “Capital of Processing Trade” continues to pave the way for the country
Processing trade is an important component of Dongguan’s open economy and foreign trade. As the birthplace of the country’s first processing trade enterprise and a “National Pilot City for the Transformation and Upgrading of Processing Trade,” Dongguan has achieved leapfrog development in processing trade since the reform and opening up. It has made significant contributions to driving employment, boosting the process of becoming a major trading city, promoting the upgrade of industrial structures, and accelerating industrialization.
The Central Committee of the Communist Party and the State Council place high importance on the development of processing trade and have called for the enhancement of its development level. In December 2023, the Ministry of Commerce and nine other departments issued the “Opinions on Enhancing the Development of Processing Trade,” proposing multiple measures in 12 areas, including encouraging the processing trade of high-value-added products. This is another guiding policy document on the development of processing trade following the “Several Opinions on Promoting the Innovative Development of Processing Trade” issued by the State Council in 2016.
In October 2023, the General Administration of Customs issued the “Implementation Plan for Promoting the Continuous High-Quality Development of Processing Trade,” which focuses on three aspects, including improving facilitation, and introduces 16 reform measures.
The aforementioned national policy measures provide guidance for our city to promote the enhanced development of processing trade. Since the release of these policies, Dongguan has boldly reformed and innovated, actively exploring experiences for the transformation and upgrading of processing trade across the nation.
Processing trade enterprises can receive up to 1 million yuan in rewards for product updates
The Plan proposes to support the exponential growth of processing trade enterprises. It focuses on supporting the development of high-growth processing trade enterprises by encouraging their participation in the “Doubling Plan” selection process and advancing the reform of processing trade supervision for enterprise groups.
The Plan also supports processing trade enterprises in increasing capital and expanding production, encouraging them to reinvest profits, especially in projects such as “zero land increase” renovations and enhancing headquarters elements. It supports the accelerated construction of the “Dongguan-Taiwan High-Tech Industrial Park” project. Foreign enterprises are encouraged to increase their investment through profit reinvestment, with eligible enterprises receiving up to 100 million yuan in rewards.
Regarding the widely discussed “replacement of old with new,” the Plan also proposes that processing trade enterprises introducing and purchasing advanced production equipment should be given priority in the allocation of funds for technological upgrades under equal conditions. It calls for the implementation of various preferential policies supporting the development of advanced manufacturing, strongly backing the equipment updates of processing trade enterprises. The Plan aims for enterprises in our city to obtain no less than 200 million yuan in national and provincial import discount funds over three years.
The Plan also supports the product updates of processing trade enterprises, focusing on aiding the construction of R&D platforms, issuing inspection and testing service vouchers, enhancing product quality, and participation in the “Dongguan Quality Products” certification, among other aspects. Specifically, enterprises that build R&D platforms to tackle new product technology challenges and achieve an excellent performance assessment in their R&D platforms are eligible for rewards up to 1 million yuan. The goal is to have the proportion of ODM+OBM exports reach 77.5% by 2026.
Fully support processing trade enterprises in exploring domestic and international markets
The second major section of “Dongguan’s 10 Measures for Processing Trade” focuses on market development. Specifically, Article 5 emphasizes support for processing trade enterprises to expand into emerging markets. This includes developing strategies tailored to individual emerging markets, organizing “Guangdong Trade Global” series of exhibition activities, fostering AEO certified enterprises, and providing services for exchange rate hedging and green electricity certificates, all aimed at enhancing the capabilities of processing trade enterprises to enter new markets.
Regarding the exchange rate issues commonly concerned by processing trade enterprises, the Plan also proposes to enhance the exchange rate hedging capabilities of processing trade enterprises, optimize exchange rate hedging services, and provide up to 50,000 yuan in subsidies to each processing trade enterprise for their first foreign exchange options transaction.
The Plan also proposes to make effective use of the “two ends outside” bonded maintenance pilot qualification, in conjunction with implementing a dynamic adjustment mechanism for the catalog of bonded maintenance products within the zone, aiming for an annual average growth of 10% in the city’s bonded maintenance import and export volume.
In line with the trend of dual circulation both domestically and internationally, the Plan also proposes supporting the integrated development of domestic and foreign trade for processing trade enterprises. This mainly involves strengthening the promotion of “three-same” (products that are the same for domestic sale and export) enterprises and product information. Support is provided for participation in the “Guangdong Trade National Dongguan Activities Catalog,” establishing the “Made in Dongguan” exhibition and sales platform, and purchasing export and domestic trade credit insurance, to promote the integrated development of domestic and foreign trade.
The Plan specifies that for enterprises participating in the “Guangdong Trade National Dongguan Activities Catalog” exhibition to expand into the domestic market, a subsidy of 3,000 yuan per standard booth will be provided. It supports industry associations (chambers of commerce), enterprises, and institutions in establishing “Made in Dongguan” exhibition and sales platforms within the Chinese mainland (outside Guangdong Province), promoting the selection of products from processing trade enterprises for these platforms, and providing subsidies for the first year’s rental and image decoration costs of the exhibition platforms. The Plan also supports enterprises integrated in both domestic and foreign trade in insuring short-term export credit insurance and domestic trade credit insurance, providing support of 30% of the actual paid insurance premiums, with a maximum cumulative support amount of 500,000 yuan per enterprise per year.
Reduce the burden on processing trade through institutional and mechanism innovation
The last three measures of “Dongguan’s 10 Measures for Processing Trade” focus on supporting processing trade enterprises to stabilize production and reduce costs through institutional and mechanism innovation. The emphasis is on strengthening support for labor, electricity, property leasing, financing, and other elements for processing trade enterprises, ensuring stable production and business operations.
For example, on the premise that there are no outstanding arrears, processing trade enterprises renting state-owned properties in Dongguan are allowed to defer the payment of three months’ rent in 2024 without incurring late fees. Simultaneously, it is proposed that processing trade enterprises renting collective properties in Dongguan, after following relevant procedural regulations, may defer the payment of three months’ rent in 2024 and be exempt from contract breach penalties.
In response to the trade frictions concerning processing trade enterprises, the Plan also proposes deepening the supply and demand matching of foreign-related legal services. It aims to expand the coverage of foreign-related legal services, organize activities such as “Commercial Legal Services Month” and “Legal Health Check,” and establish and improve legal risk prevention for trade and investment. The plan strengthens guidance services for training in overseas intellectual property protection and dispute response for processing trade, advising enterprises on how to handle trade frictions and protect their legitimate rights and interests.
The Plan also proposes to establish a tiered and categorized service mechanism for processing trade enterprises. Each year, a group of key processing trade enterprises will be selected and dynamically updated to receive differentiated policy support. Key processing trade enterprises will receive preferential treatment in areas such as talent recruitment, work visas, labor and energy use, financing support, foreign exchange settlements, spatial guarantees, and AEO certification. The Plan includes managing liaison meetings between government and Japanese-funded and Korean-funded enterprises in Dongguan, as well as joint meetings for the upgrading and transformation of Hong Kong-funded enterprises in Dongguan. Additionally, mechanisms such as the city’s economic operation coordination meetings and foreign investment joint meetings will be utilized to promptly understand and coordinate the resolution of investment, development, and operational issues faced by key processing trade enterprises.
Dongguan’s processing trade imports and exports grew by 8.4% in April alone
The latest data from the Bureau of Commerce of Dongguan City shows that from January to April this year, Dongguan’s processing trade imports and exports reached 114.07 billion yuan, a year-on-year increase of 5.3%. In April alone, there was a growth of 8.4%. In the first two months of this year, Dongguan’s processing trade imports and exports achieved their first positive growth since last year—totaling 53.41 billion yuan, up 6.7% year-on-year. Against the backdrop of a complex and variable global foreign trade environment, Dongguan’s processing trade has demonstrated strong resilience with its significant, counter-trend growth.
Experts interviewed stated that in the past year of 2023, the external environment was fraught with disruptions, and the complexity and challenges of foreign trade were unprecedented. Since the first quarter of this year, facing challenges such as an increasingly complex international situation, still prominent insufficient demand, and continued pressure on leading industries’ production and sales, the achievements of Dongguan’s processing trade, often referred to as a “good start,” have indeed been hard-won.
“Despite the global downturn, Dongguan’s counter-trend growth in processing trade is a cumulative result of the improving global trade situation and Dongguan’s economic transformation and upgrading,” stated Bai Ming, a member of the Academic Degrees Committee of the Ministry of Commerce. The recovery of the global supply chain is fundamental, while the overall improvement in the quality of Dongguan’s foreign trade has a progressive cumulative effect. Together, these factors not only contribute to the ‘good start’ of the processing trade but also inject new momentum into the strong start of Dongguan’s foreign trade.
