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Foreign Direct Investment Vehicles in China

Foreign Direct Investment Vehicles in China

wa mj ar pearls wholesaleLegislation
There are alternative investment formats available to foreign investors in China: equity joint ventures (EJV), cooperative joint ventures (CJV), Sino-foreign-invested joint stock companies (SFJSC), wholly foreign-owned enterprises (WFOE), and holding companies (also referred to as investment companies) (HC) and technology transfer. The doors to foreign direct investment via the EJV and CJV formats were opened first in 1979 with the enactment of the People’s Republic of China Law on Chinese—Foreign Equity Joint Ventures.

WFOE investment became possible after the promulgation of the Law of the People’s Republic of
China on Wholly Foreign-Owned Enterprises in 1986, and the Detailed Implementation Regulations for the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises, which became effective in 1986. FJSC investment became possible in 1985 with the Provisional Regulations on the Establishment of Foreign Invested Joint Stock Companies. HC investment was opened with the 1995 Tentative Provisions for Establishment of Companies with an Investment Nature by Foreign Investors.

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In addition to the above, the 1999 Contract Law of the People’s Republic of China and the 1993
People’s Republic of China Company Law are also important pieces of legislation. The Company Law as well as the EJV law also apply to WFOEs where the WFOE laws do not cover a particular matter. For several years China has been enacting, repealing and amending its legislation to facilitate its entry into WTO. China has adopted the civil law system rather than the common law. As such its current practice is to adopt statutes and supplement them with implementing regulations and
interpretations. While court precedent is somewhat influential, it is not binding law per se.

The goal of the WTO is to promote free and open trade among its member states. This does not
directly include investment; however, WTO membership mandates the principle of national treatment and this affects foreign investments. As China is reshaping its laws to unify its bifurcated treatment of domestic and foreign interests, notably in regard to taxation and most
contracts, it still treats FIEs separately from domestic investment in the areas of governance.

Regulation of FDI

The two primary governmental agencies involved in regulating, permitting and governing FIEs
are the Ministry of Commerce and its local arms and the State Administration for Industry and
Commerce and its local arm. MOC is the gatekeeper and all FDI and technology transfers are
channeled through its processes and regulated by it. The SAIC is charged with licensing, corporate governance, trademark administration and fair trade. There are numerous other state,
provincial, local and industrial agencies having their own local regulations that also impact on
FDI.

Cooperative or contractual joint ventures

CJVs provide a flexible joint venture format. This is often preferred for shorter-term projects. The venture may be, but does not have to be, an incorporated legal person. If the company does
register as a legal person, then a minimum of 25% of the registered capital has to be contributed
by the foreign investor. The parties are free to distribute profit and recover investment capital as negotiated. For example, the parties may agree on an equal equity split but provide for a different profit allocation ratio. CJVs have been popular in projects involving large start-up development costs such as hotels and oil and gas projects. A CJV must have either a Board of Directors with a Chairman and Deputy Chairman, or a Management Committee, with a Director and Deputy Director, as well as a managerial structure and these functions are similar to those of an EJV described below.

Equity joint ventures

EJVs represent a compromise of China’s initial preference for technology licensing rather than
investment and they have been allowed and regulated since 1979. An EJV is a limited liability
company created pursuant to the EJV Law in which the investor parties share investment, control, risk and profit in accordance with the equity split. The Board of Directors plays the role of shareholder and board because, since no shares are issued, there are no shareholders. Equity
interests are certified by qualified accountants.

The industrial sectors open to EJVs are more numerous than those open to WFOEs. The Guideline Catalogue of Foreign Investment Industries classifies sectors as encouraged, permitted, restricted and prohibited. With WTO accession the first three categories have all increased, at the expense of the prohibited category. There are many sectors where EJVs are, but WFOEs are not, allowed. In some sectors the foreign equity is limited to a certain percentage.

EJVs are established via the following process:

  • The parties negotiate and sign a Letter of Intent which, although not necessarily legally
    binding, is very important and should be treated seriously. The LOI should cover all
    important issues related to the project and be broad enough to allow a party to alter its
    position if necessary. It is wise to include exclusivity and confidentiality provisions in the
    LOI and to state that they are intended to be legally binding
  • The Chinese party prepares a project proposal report to be submitted to MOC or other
    approving authority
  • The LOI is then submitted to the approval authorities for preliminary approval, which
    includes permission to negotiate the project; following preliminary approval, a joint
    feasibility study is undertaken. As the feasibility study is the basis for formal project
    approval, it effectively defines the permitted project in the eyes of the Government.
    Again, while the feasibility study is not necessarily legally binding it is extremely critical
    and should be treated as such. Although the Chinese investor may be willing to take
    charge of the feasibility study work, the foreign investor should participate and be sure
    that it represents its views as well. Both parties must sign
  • While the feasibility study is under way the parties negotiate the joint venture contract and
    its annexes which typically include the articles of association, technology license, export
    agency agreements and other important contracts or documents
  • The feasibility study, joint venture contract and articles of association are then submitted
    to the approval authority. The contracts take effect upon approval
  • The joint venture company registers with the Administration of Industry and Commerce
    and receives its business license
  • Within 30 days of the issuance of the business license, the company must process
    registrations with customs, tax, the State Administration for Foreign Exchange and other
    government agencies

Throughout the approval process it is deemed to be better for the foreign party to establish and maintain good relationships with government officials and departments rather than leave the matter to the Chinese partner. In general, approval levels for productive projects are: $ 100 million of registered capital and greater – The State Council; US$30 million to US$100 million – MOFCOM; less than US$30 million – state authorities. The local approvals are seen as easier to obtain than MOFCOM approvals even though the approving authority might be a branch of the latter. Because of this the local partner might suggest the project be broken into parts within the limits allotted to local authority. This might work to the disadvantage of the foreign investor and should be avoided. While EJVs are the FDI format most acceptable to MOFCOM, they are not allowed in every sector and, where allowed there may be limitations on the equity interest held by the foreign investor.

Checklist for a joint venture contract:

  • name and location of the JVC
  • business scope of the JVC
  • capital structure and contribution schedule
  • Board of Directors provisions: Chairman, members, powers, limitations and meetings
  • general management provisions: managerial structure, powers and limitations
  • land and facilities — offices, plant and factory
  • project schedule – construction and start-up
  • sales
  • financial provisions – tax, audit, accounting, finance management, bank accounts, profit
    allocation and distribution
  • investment incentives
  • labour – sourcing, hiring, probation, firing and unions
  • procurement of technology
  • procurement of raw materials for production
  • joint venture term, expiration and termination provisions
  • duties, powers and rights of the investors
  • liability of the investors
  • dispute resolution

Wholly foreign-owned enterprises

WFOEs, companies owned by one or more foreign investors, are authorized under the Wholly Foreign-owned Enterprise Law in 1986, and the Wholly Foreign-owned Enterprise Law Implementing Rules of 1990, are seen as having fewer management and profitability problems and are now more popular among the foreign investment community than joint ventures because they do away with conflicting partner interests, corporate cultural differences and other control problems inherent in any joint venture.

WFOE project proposals are submitted to MOC or local authorities, depending on the registered capital of the project, and if approved, a formal application is made with the company’s proposed articles of association and a feasibility study. Documents relevant to the investors are also required. If approved it takes the form of a limited liability company for a specified term, although a perpetual existence is theoretically possible. After approval the WFOE must go through the same AIC registrations as any other company. Laws, regulations and policies, which are passed for other FIEs often apply to WFOEs.

Where an investment project has begun as a joint venture limited liability company, it is often converted into a wholly foreign-owned company with the buyout of the PRC party’s equity. This is accomplished by assignment of equity after approval of the Chinese partner and the original approval authority pursuant to the 1997 Several Regulations Of The Ministry Of Foreign Trade And Economic Cooperation And The State Administration For Industry And Commerce Concerning Changes In The Equity Interest Of Investors In Foreign Invested Enterprises. Considerable discretion is given to the local authorities in the actual conversion process.

Holding (investment) companies

HCs are governed by The Provisional Regulations for the Investment and Operation of Investment Companies by Foreign Investors and by the 1996—2001 Explanations of and Supplements to the Provisional Regulations. The impetus for this vehicle came from the foreign investment community which wanted a format that would allow certain facilities that were not present under the other formats. This investment format is a FIE limited liability company, either wholly-owned or joint ventured, without the right to manufacture. It allows integration and rationalization of a parent’s China investment structure, direct hiring of PRC staff, centralization of PRC project shareholdings, human resources, sales, marketing and technical services and procurement. It does not allow direct intra-group lending or consolidated accounting.

Athough having an HC raises the profile and prestige of the parent company within China, an HC has not been allowed to be engaged in trading services, production, or buying A shares (reserved for PRC legal persons) of listed PRC companies. With WTO accession, HCs are expected to be utilized in trading and financing investments (without participation of the People’s Bank of China) as it opens up to FIEs. Because of the trading restrictions, therefore, an HC is not a replacement for a representative office in locales employing a strict interpretation of the HC laws and regulations.

The requirements for establishing an HC are stringent: the foreign investor’s asset value must be at least US$400 million; the parent must have established at least one FIE with at least US$ 10 million of the foreign investor’s investment; and have at least three FIE projects which have received project approval or have set up at least 10 manufacturing or construction FIEs in which it has invested at least US$30 million. Like many PRC regulations, the HC Regulations are selectively applied by MOC, which is given the discretion to ignore certain requirements for establishing an HC.

Additional matters

There are other matters that are relevant to FDI such as arbitration, tax, customs and termination. Moreover, there are local regulations, policies and practices which apply to many issues discussed above and attention must also be paid to those when meeting with local officials. MOC is the approving authority for projects valued at over US$ 30 million. For projects below that limit, the agencies in charge of approval include the state ministries, provided a project does not require overall balancing in terms of production, construction or operations. This rule applies to investment projects in the ‘permitted’ and ‘restricted’ categories. For the ‘encouraged’ category, provincial authorities are the approving authorities for investments exceeding US$ 30 million, and local authorities for investment below that level. In light industries, regardless of size, provincial level authorities are allowed to approve foreign investment. The investment limit is lower for projects in the relatively backward western region of China.
Articles source: Gems & Jewellery Industry in China, Embassy of India, Beijing
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Investing in the Jewelery Industry in China

Investing in the Jewellery Industry in China

wa mj ar pearls wholesaleThanks to her large market size, huge population (offering dual gain in terms of cheap labour and quantum of demand), a workforce adept in low-skill manufacturing and infrastructure and preferential government policies, China has managed to attract huge foreign investment since the days of reforms and opening up the started in the late 1980s, overtaking the US as the largest recipient of FDI in 2002, a position she maintained in the next year. Investment, rather than trade, which is affected by various tariff and non-tariff barriers, has become an attractive proposition for FDI in many sectors. Jewellery processing is an area, which is encouraged by the government.

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China enjoys certain advantages in this sector in terms of natural resources, and skill of the workforce. For an Indian enterprise, the choice of a Chinese production base can be due to a high level of protection granted to finished jewellery products here, as also the need to cater to specialized demands from Chinese consumers. A thorough knowledge of the investment conditions in China is an essential prerequisite for this. This chapter will include information relating to investment like:

  1. Categories of foreign investment allowed
  2. Different modes of foreign investment
  3. Tips for negotiation with Chinese partners in case of JVs
  4. Post-entry strategies of marketing
  5. Taxation of foreign enterprises

Investment Climate in China

After China’s WTO accession, in order to streamline the process of approval for foreign direct investment into China, and to clarify the country’s social and economic priorities, the central government promulgated a set of new Regulations for Guiding the Direction of Foreign Investment in 2002, to replace the Provisional Regulations for Guiding the Direction of Foreign Investment (1995). The new Regulations assign the responsibility for regularly publishing a Foreign Investment Catalogue to the National Development & Reforms Commission (NRDC), the Ministry of Foreign Trade and Economic Cooperation – renamed as Ministry of Commerce (MOFCOM) in March 2003, and the State Economic and Trade Commission (now absorbed in the restructured MOFCOM). This catalogue guides the examination and approval of foreign investment projects.

Under the Regulations, foreign investment projects fall into four categories: Encouraged, Restricted, Prohibited and Permitted. Projects in the first three categories are defined in the Catalogue in detail, while permitted projects are all those outside the purview of the first three. There is some flexibility within the Catalogue; for instance, projects in the ‘Permitted’ category will be deemed ‘Encouraged’ if they export 100% of their output. The category to which a project belongs has implications in terms of investment approval and the extent of tax exemptions.

Encouraged foreign investments include the following:

  • Projects related to new agricultural technology, construction of energy sources, transportation and raw materials for the industry
  • Projects using new or advanced technology, including projects that can increase product quality, save energy and raw materials, raise economic efficiency and alleviate shortages in the domestic market.
  • Projects that meet international market demand, enhance product quality, open up new markets and increase exports
  • Projects that involve integrated use of China’s resources or use of renewable resources, involving new technology or equipment for preventing and controlling environmental pollution.
  • Projects that can develop the manpower and resources of central and western China.

Restricted categories of foreign investment include the following:

  • Projects already developed in China, where the technology has already been imported and where capacity can meet market demand
  • Projects with an adverse effect on the environment and energy conservation
  • Projects involving exploring for and/or extracting rare or precious mineral resources, and
  • Projects in industries requiring central planning by the state

Prohibited foreign investments include the following:

  • Projects that endanger state security or harm public interest
  • Projects that pollute the environment or endanger human health
  • Projects that occupy large tracts of farmland or endanger the security or efficient use of military resources
  • Projects that use manufacturing techniques or technologies unique to China, and
  • Other projects prohibited under state laws and administrative regulations

In more concrete terms, the catalog does not enumerate gems and jewellery manufacturing among the encouraged, restricted or prohibited categories; thus, it is a permitted category. Thus, if an Indian gems and jewellery manufacturer exports 100% of its produce, it can qualify as an encouraged category in terms of investment approval. Exploration and mining of precious metals (gold, silver and platinum etc.) and precious non-metallic ores (like diamond), on the other hand, are included in the restricted category.

Articles source: Gems & Jewellery Industry in China, Embassy of India, Beijing
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Gems and Jewellery Trade between India and China

Gems and Jewellery Trade between India and China

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Gems and Jewellery trade between India and China has shown a rising trend over the years, the main features of which are given in the following:

Observations about Gems & Jewellery Trade between India and China:

  • Precious stones/gems & jewellery under HS Code 71 were the fifth largest item of export from India to China in 2003. Overall export volume stood at US$ 164 million, with an increase of 62.1% over the previous year. China’s global import under HS Code 71 was US$ 1846 million. Imports grew at 38.40% during this period.
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  • Diamond (Under HS Code 7102) is the principal commodity in gems & jewellery trade between India and China. This is the leading sub-category of China’s global import under HS 71 (import volume of US$ 1242 million, accounting for 67.27% of China’s import of all HS 71 items), and also the leading sub-category of India’s exports to China (export volume of US$ 162.2 million, accounting for 98.77% of India’s exports to China under HS code 71). Thus, there are demand-supply complementarities in diamond trade between India and China. India is the third largest exporter of diamond (HS 7102) to China, occupying a 13.06% share of China’s imports.
  • Diamond export from India to China has increased fast, registering a 64.02% increase over export volume last year, while Chinese global import of diamond has increased slower at 24.55%. Thus, the share of India in China’s import of diamond has increased in 2003.
  • Within diamond, China’s top item of imports is unworked non-industrial diamond (HS 71023100), with a volume of US$ 790.6 million, and accounting for about 63.65% of total diamond imports of the nation. India exported miniscule amount of this item to China in 2003. India’s main item of export is non-industrial diamonds under HS 71023900, which is no. 2 item of China’s global imports under HS 7102, with import volume of US$ 423.7 million (34.1% of China’s total diamond imports). Of this, India supplies US$ 161 million.
  • China’s global diamond imports under HS 71023900 increased by 40.24% in 2003 over 2002, while imports from India increased higher at 65.43%. Thus, India’s share of this item in China’s imports has increased in the above period.
  • India’s export of unsorted diamond (HS 71021000) to China has declined from US$ 2.62 million in 2002 to US$ 1.07 million in 2003, a fall of 59%. However, this was accounted for by the decline in price, and volume actually went up by 16.36% from 51256 carat to 59642 carat.
  • Platinum (HS 7110) is the second largest item of import into China (import volume US$ 260.2 million), accounting for 14% of all imports under HS 71. The share of platinum in China’s imports has been increasing in recent years. India’s share in this segment is a miniscule 0.03%. Thus, there is potential for trade in this growing segment.
  • Gold jewellery and parts (HS 71131919) account for over 89% of India’s exports to China under HS 7113 (jewellery with precious metals), the second largest 4 HS Code item exported by India to China. Export volume for this item stood at US$ 0.81 million in 2003 and has registered a huge increase of 222% over the same period last year.
  • Other stones, not strung (HS 7103) are India’s number three item of export to China under HS 71, next only to diamond and precious metal jewellery. However, trade in this segment has fallen by 13.74% in 2003 compared to 2002, and stand at US$ 0.91 million. This fall can be traced to the fall in the value of India’s export of rubies, sapphires & emeralds under HS 71039100 by 34.12% (China’s global imports in this item also showed a decline by 19.24%). The fall in value in turn is attributable to the fall in price, even as quantum rose. Jadeites exports from India under HS 71039910 have increased at over 105% in this period, in both value and volume, though volumes still remain small.
  • Other items of India’s exports to China under HS Code 71 are small in terms of value and volume.
  • India’s imports from China under HS Code 71 stood at 33.4 million in 2003. The growth has been very small at just over 2%. Thus, in terms of jewellery trade, India enjoys advantage in trade with China. The main items of China’s exports to India are silver, pearl, dust and powder, synthetic stones, imitation jewellery etc.

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Articles source: Gems & Jewellery Industry in China, Embassy of India, Beijing
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China’s Gems & Jewelery Trade with the world

China’s Gems & Jewellery Trade with the world

wa mj ar pearls wholesaleChina has emerged as a major player in world jewellery trade in recent years, both in terms of exports and imports. Her exports under HS Code 71 comprising precious stones and metals, mostly through processing of imported items, went up 15.94% in 2003, climbing to US$ 3.296 billion from US$ 2.843 billion in 2002. Similarly, her imports went up 38.40% in 2003, rising to US$ 1.846 billion from US$ 1.334 billion in 2002.

Within the gems and jewellery segment, China enjoyed a net balance of trade in 2003 to the tune of nearly US$ 1.45 billion. Of this China’s exports were worth US$ 3.29 billion and imports US$ 1.85 billion. China’s main items of export are gold and diamond jewellery, non-industrial diamond and silver jewellery, imitation jewellery and pearls etc. China mainly imports are nonindustrial unworked diamond, platinum powder, (the two of them together constituting over 80% of China’s total imports) silver, other precious and semi-precious stones, precious metal jewellery etc. In terms of proportionate value of items, China’s imports seem more diversified than her exports. However, a substantial part of this is used as raw material and finished diamond jewellery and platinum products are used for export.

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In terms of export trade in jewellery products (jewellery is the twenty-fifth largest item of China’s exports), China has been a major exporter of jewellery with precious metals (HS Code 7113), where, in 2003, China exported a total of US$ 1.38 billion in value terms, accounting for over 40% of the country’s total export in gems and jewellery. Gold- and diamond-mounted jewellery (HS Code 71131911) constituted almost half of China’s exports within that category, while gold jewellery and parts (HS Code 71131919) accounted for another two-fifths.

Diamond is another area where China’s exports have grown steadily, and at US$ 912 million in the whole of 2003, was the second largest category of the country’s exports in the gems and jewellery segment. Within diamonds, non-industrial diamonds, excluding mounted or set diamonds (HS Code 71023900) accounted for over 90% of total exports in this category. Another item that has grown markedly from US$ 164 million in 2001 to US$ 448 million in 2003, and occupies the third place among China’s gems and jewellery exports, is silver. Imitation jewellery (US$ 310 million) and pearls (US$ 66 million) were respectively placed at number four and five.

In imports, China’s trade is concentrated in diamonds, accounting for over two-thirds of the total value of import under the category of gems and jewellery. China has also started importing
substantial quantum of platinum in recent times. Value addition in both diamond and platinum are done locally.

In 2003, China imported diamond worth a total of US$ 1.2 billion, most of it non-industrial un-worked diamond. The main exporting nations were Belgium (supplying nearly half of China’s total import), South Africa, India, Israel and the US. Diamond registered a 24.5% growth in 2003. Comparatively speaking, the growth of platinum, the second largest category of Chinese import within the jewellery segment, was strikingly higher at 238.6% in 2003. China’s total platinum import volume in 2003 was US$ 260 million. Nearly three-fourths of it was in unwrought platinum powder. China also imports silver, other stones and jewellery with precious stones.

Table II. 1 gives an idea of the growth of China’s gems and jewellery exports under various 4 HS Categories. Table II. 2 gives a more detailed 8 HS Code break-up of China’s imports from the rest of the world. Table II. 3 lists out the major countries exporting gems and jewellery to China, and highlights India’s position and share vis-à-vis them.
027

037

036

035

033

032

031

Articles source: Gems & Jewellery Industry in China, Embassy of India, Beijing
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Wholesale pearl jewelry sets : Trading with China in Jewellery

Wholesale pearl jewelry sets : Trading with China in Jewellery

wa mj ar pearls wholesaleAlong with expansion of bilateral trade between India and China, trade in gems and jewellery has also gone up. India enjoys reputation in China as the premier processing base for diamond and gold jewellery. In 2003 Gems and Jewellery was the fifth largest item of India’s exports to China. India occupies the number three position among nations exporting precious stones and metals to China. India’s exports of gems and jewellery to China, the bulk of it being diamond, increased by 62.1% in 2003 demonstrating the vibrancy of the trade market. It is essential to understand the trade patterns in jewellery as well as trade channels available for any successful trade deal. (reference: wholesale pearl jewelry sets )

This chapter contains information on the following:

1. Foreign Trade system in China

  • Role of FTCs o Getting to know the right contacts
  • China’s trade with the rest of the world on gems and jewellery
  • China’s exports
  • China’s imports

2. China’s Gems and Jewellery trade with India

  • Detailed trends of India’s exports
  • Main competitors for India
  • India’s imports from China
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I. Foreign Trading System in China
Before reforms and opening up in 1979, China’s foreign trade policy was determined almost wholly by political objectives. Trade policy was characterized by insistence on ‘self sufficiency’ and import-substitution. Authority to import and export was centralized in fewer than 20 foreign trade corporations (FTCs) under the Ministry of Foreign Trade. Each of these FTCs dealt only with specified commodities, under quota. The FTCs turned all foreign exchange earned from exports over to the Bank of China. Importers of consumer goods were minimal, and jewellery imports were nil. (reference: wholesale pearl jewelry sets )

Under reforms programmed, the policy of self sufficiency was replaced by a strategy of importing advanced technology to promote a rapid expansion in exports of manufactured goods. At the same time, the foreign trade monopoly of the FTCs was broken. The number of domestic companies with trading rights jumped from 900 in 1985 to 16000 in 2000. Moreover, the restrictions regulating the FTCs were gradually relaxed in terms of foreign exchange reserves requirements and product lines etc. Autonomy of the FTCs was also enhanced, as was their responsibility for profit and loss. In 1999, private domestic companies were given permission to apply for foreign trade rights. The competitive arena was further widened by replacing the application and permission-based system with one requiring only registration and ratification. (reference: wholesale pearl jewelry sets )

Before 1994, internal unpublished administrative measures and regulations governed China’s trade. The Foreign Trade Law of 1994 codified reforms and set principles for China’s trade regime more in line with WTO requirement for transparency. Under the 1994 law, FTCs became the agents of Chinese enterprises wishing to import or export goods. Large FTCs have a great deal of experience with international markets and practices. A new Foreign Trade Law has come into effect from July 2004, which substantially liberalizes foreign trade and enables producers/manufacturers to trade directly with a foreign entity. (reference: wholesale pearl jewelry sets )

Before China’s accession to the WTO, foreign invested manufacturing enterprises, including jewellery manufacturers and processors, were only allowed to import raw materials required for their production processes, and could only export their own finished products. Foreign companies had no choice but to trade through FTCs. In the run-up to the WTO, trade was allowed through wholly owned foreign enterprises (WOFE) operating in bonded zones, which could and export third party goods. Under WTO, China began the gradual extension of trading and distribution rights to foreign enterprises. Equity limits on foreign ownership of distribution companies will be phased out by December 11, 2004. (reference: wholesale pearl jewelry sets )

For foreign vendors without a presence in China, especially those selling their products into China for the first time, appointing an agent in Hong Kong can be a relatively easy and hassle-free method for importing into China. However, care should be exercised in choosing an agent. The exporter needs to check what kind of presence the agent has in China, and whether his other products conflict with the exporter’s products. In sectors like jewellery, smuggling used to a major problem in the past, but with the establishment of SDE and SGE, the incidence of smuggling has come down a lot. Trade in gold and diamond can now be conducted directly at the exchanges, rather than going through agents. (reference: wholesale pearl jewelry sets )

For trade with FTC directly, a foreign exporter can take recourse to any of the following means to identify and locate them:

  • Internet: Several internet sites have database of Chinese FTCs, usually indexed by both region and business scope (Customs HS Code). One example of such free internet-based database is the China Business Guide of Ministry of Commerce (www.ccn.mofcom.gov.cn )
  • Letters of introduction to overseas branches of FTCs or to their head offices.
  • Trade fairs: Guangdong trade fair held twice every year in April and October is a mega event with the aim of promoting Chinese exports to the rest of the world. A number of Indian companies have been participating in the fairs regularly. This apart, there are product specific exhibitions. A list of major jewellery-related exhibitions is given at appendix D in the resources section.

Embassies/Consulates: The Embassy of India in Beijing processes trade inquiries from India, both for prospective exports and imports. With the Embassy having its own website and e-mail facility, traders/businessmen in both India and China are being encouraged to communicate with the Embassy through e-mail. The trade queries received by the Mission are not only replied within a time-frame (3-4 days) by culling the necessary contact details of Indian exporters from an updated data base but are also sent to the respective Product councils, Chambers of Commerce and Associations in India which in turn publish the same in their newsletters thereby generating greater publicity and promoting business opportunities. The Embassy also organizes trade promotion events, provides support to export promotion councils and participates in and organizes exhibitions etc., e.g. the “Made in India” show co-organized with Confederation of Indian Industries in October 2003, which is planned to be repeated in 2004. (reference: wholesale pearl jewelry sets )

In dealing with smaller FTCs, it is advisable to ensure that it has the specific authority to deal with the goods in question. Under Chinese contract law, any contract by companies without trading rights in a particular product is null and void. Therefore, in cases of trade dispute arising with Chinese parties in the course of a trade transaction, whether or not legal recourse will be available will depend on whether the FTC is allowed to trade. In reality, however, most FTCs exceed their authority in a routine manner. A legitimate FTC should be able to supply a copy of its business license indicating its trading rights. A cautious approach is in order to secure one’s business and financial interests with a Chinese FTC. (reference: wholesale pearl jewelry sets )
Articles source: Gems & Jewellery Industry in China, Embassy of India, Beijing. (reference: wholesale pearl jewelry sets )
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