Vi Digital Library - Text Preview
Trade Facilitation and Poverty Reduction: China - ASEAN Region Case Study
Working paper by Wu, Laping /ARTNeT, 2013
Download original document (English)
ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE
NO. 135 | OCTOBER 2013
Gloria O. Pasadilla
Tra e Facil tation and
Prof. Laping Wu
The Asia-Pacific Research and Training Network on Trade (ARTNeT) is an open
regional network of research and academic institutions specializing in international
trade policy and facilitation issues. IDRC, UNCTAD, UNDP, ESCAP and WTO, as
core network partners, provide substantive and/or financial support to the network.
The Trade and Investment Division of ESCAP, the regional branch of the United
Nations for Asia and the Pacific, provides the Secretariat of the network and a direct
regional link to trade policymakers and other international organizations.
The ARTNeT Working Paper Series disseminates the findings of work in progress to
encourage the exchange of ideas about trade issues. An objective of the series is to
publish the findings quickly, even if the presentations are less than fully polished.
ARTNeT working papers are available online at www.artnetontrade.org. All material
in the working papers may be freely quoted or reprinted, but acknowledgment is
requested, together with a copy of the publication containing the quotation or reprint.
The use of the working papers for any commercial purpose, including resale, is
The designations employed and the presentation of the material in this publication do
not imply the expression of any opinion whatsoever on the part of the Secretariat of
the United Nations concerning the legal status of any country, territory, city or area,
or of its authorities, or concerning the delimitation of its frontiers or boundaries.
Where the designation “country or area” appears, it covers countries, territories,
cities or areas. Bibliographical and other references have, wherever possible, been
verified. The United Nations bears no responsibility for the availability or functioning
of URLs. The views expressed in this publication are those of the authors and do not
necessarily reflect the views of the United Nations. The opinions, figures and
estimates set forth in this publication are the responsibility of the authors, and should
not necessarily be considered as reflecting the views or carrying the endorsement of
the United Nations. Any errors are the responsibility of the authors. Mention of firm
names and commercial products does not imply the endorsement of the United
© ARTNeT 2013
NO. 135 | OCTOBER 2013
Trade Facilitation and Poverty Reduction:
China-ASEAN Region Case Study
Laping Wu *
* Project members: Prof. Laping Wu, Associate Prof. Hongman Liu, Assistant Prof.
Junfang Guo, Assistant Prof. Xiaoshu Wang, Assistant Prof. Min Sha, Rui Gu,
Wenzhi Wang and Yuhe Song, Shuiqin Yu, Tian Tian and Shang Xu.
ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE
Please cite this paper as: Laping Wu (2013). Trade Facilitation and Poverty
Reduction: China-ASEAN Region Case Study. ARTNeT Working Paper No. 135.
Available at www.artnetontrade.org.
Abstract: Trade facilitation has been a key part in the opening up process of China. This
paper aims to investigate the linkage between trade facilitation and poverty reduction in
China. It discusses the impact of the trade facilitation practises in China and the China-
ASEAN cooperation on trade between China and ASEAN countries. A provincial panel data
set for China from 2000 to 2008 is employed to quantify the impact of agricultural imports,
agricultural exports and trade facilitation on poverty. The results show that a 1 per cent
increase in port efficiency results in a 1.051 per cent decrease in the poverty index.
JEL Classification: F15, I3, O24
Key words: Trade Facilitation, China, ASEAN, Poverty
1. Trade facilitation and its impacts on poverty ....................................................................... 3
2. Trade facilitation practices in China .................................................................................... 3
2.1. Overall development of trade facilitation practices in China ........................................ 4
2.1.1. Port efficiency in China .................................................................................. 5
2.1.2. Reform and development of China’s customs procedures .............................. 6
22.214.171.124. Reform of China customs procedures ..................................................... 7
126.96.36.199. International cooperation ......................................................................... 8
188.8.131.52. Reform of Ningbo bonded area ............................................................... 8
2.1.3. Development of the Chinese institutional environment ................................. 10
2.1.4. Development of E-commerce and the formulation of related laws ................ 11
184.108.40.206 Development of e-commerce ................................................................. 11
220.127.116.11. Policies to promote the development of e-commerce ............................ 12
3. China-ASEAN cooperation and trade facilitation practices ............................................... 14
3.1. Impacts of ASEAN trade facilitation on Chinese trade .............................................. 14
3.2. Impacts of Chinese trade facilitation on ASEAN trade .............................................. 16
4. Impacts of trade facilitation on poverty ............................................................................. 22
4.1. Impact of trade on poverty ........................................................................................ 22
4.1.1. The effects of agricultural imports on poverty ............................................... 22
4.1.2. The effects of agricultural exports on poverty ............................................... 23
4.2. Impacts of trade facilitation on poverty: A case study of the manufacture industry and
port efficiency ........................................................................................................... 23
5. Conclusion and recommendations ................................................................................... 24
5.1. Impacts of trade facilitation on poverty reduction ...................................................... 25
5.2. Enhancing capacity-building in trade facilitation ........................................................ 25
5.2.1. Promoting reform of customs procedures ..................................................... 25
5.2.2. Strengthening infrastructure construction for trade and investment facilitation .
5.2.3. Improving development of e-business .......................................................... 26
5.2.4. Improve the institutional environment ........................................................... 26
5.3. Enhance coordination between China and ASEAN in trade and investment facilitation
5.3.1. Promote unified standards ........................................................................... 26
5.3.2. Establish trade facilitation committees in China and ASEAN members ........ 27
References .......................................................................................................................... 28
Annex ............................................................................................................................. 29
List of Tables
Table 1: Facilitation measures in the Ningbo bonded area
Table 2: E-commerce policies and regulations of China
Table 3: Imports and exports of China and 10 ASEAN members, 2003-2010
Table 4: Trade balance of China with 10 ASEAN countries
Table 5: Elasticity of agricultural imports on poverty reduction
Table 6: Elasticity of agricultural exports on poverty reduction
Table 7: Results of elasticity of ports on poverty
Table 8: Definitions of exogenous and endogenous variables
1. Trade facilitation and its impacts on poverty
Zhongying Sun (2009) applied a gravity model in his study of the role of trade facilitation; the
results showed that the elasticities were different for the various trade facilitation measures.
Port efficiency has positive effects in bilateral trade, both for importers and for exporters.
Juanjuan Xie and Jing Yue (2011) made an empirical analysis of China-ASEAN trade using
a gravity model. Junlan Shang and Ping Zhou (2012) also constructed a gravity model to
analyse the impacts of trade facilitation on China-ASEAN trade, they also studied the
impacts of trade facilitation on Chinese trade, and compared trade facilitation and tariff
reductions; the results showed that trade facilitation could improve trade much more than
tariff reductions. Lin Sun and Xufei Xu (2011) measured trade facilitation from port efficiency,
customs environment, regulation and e-commerce. The results showed that the level of
Chinese trade facilitation is near the world average, but among ASEAN countries there is a
big gap. Singapore is much higher than average while Malaysia, Thailand and Brunei
Darussalam are also near the world average. Viet Nam and Indonesia are lower than
Lin Sun and Xufei Xu (2011) also constructed a gravity model to test the impacts of trade
facilitation on trade. The results showed that since the ASEAN Free Trade Zone was
implemented in 2010, trade facilitation has had significant effects on trade. Air transportation
is closely and positively related to exports of manufactured products. A 1 per cent
improvement in air transportation infrastructure results in a 1.48 per cent increase in exports
of manufactured products. However, the improvements both in customs procedures and in
trade barriers are not significant. Finally, the author simulated the results of different forms of
air transportation infrastructure. The results showed that when the infrastructure in all
ASEAN members reaches an average level (5.2), exports of Chinese manufactures to
ASEAN will increase by US$ 4.733 billion at a growth rate of 39.34 per cent. When ASEAN
air transportation infrastructure reaches the highest level, exports of Chinese manufactures
to ASEAN will increase by 70.95 per cent.
2. Trade facilitation practices in China
This study focuses on four components of trade facilitation – transportation, customs
clearance, institutions and policies, and e-commerce.
Transportation facilitation mainly refers to whether: (a) infrastructure, including ports, canals
and other areas of water transportation, can meet business requirements; (b) air transport
promotes the country’s commercial development; and (c) infrastructure maintenance and
development are scientifically planned and have adequate financial support.
Customs clearance refers to simplifying customs procedures through new technology in
order to increase customs clearance efficiency.
Institutions and policies mainly refers to trade-related rules and policies, including whether:
(a) competition-related laws and regulations limit unfair competition effectively; (b) the
protection of intellectual property rights is fully implemented; (c) the legal and regulatory
framework promotes the competitiveness of enterprises; (d) government policy is
transparent; and (e) bureaucracy, bribery and corruption have hindered commercial and
The last component is e-commerce, which includes the hardware and software environment
for e-commerce development.
2.1. Overall development of trade facilitation practices in China
China has been continuously promoting trade facilitation as part of its reform and opening up
process, from a single department to multiple departments, from a single link to multiple
links, from the improvement of trade management to the extensive application of information
technology, which has showed a high-level, wide-range, all-around feature. China first
reformed foreign trade management on a large scale, and substantially reduced or removed
the import quota. After joining the World Trade Organization (WTO), China’s foreign trade
policy has been inclined towards more active participation in regional trade and economic
cooperation, such as implementing the China-ASEAN Free Trade Area, promoting trade and
investment facilitation within the scope of the Shanghai Cooperation Organization, and
actively pursuing transit transport agreement negotiations with the Russian Federation and
Mongolia as well as making appropriate arrangements to boost the development of trade
The amendment of the “Foreign Trade Law of the People’s Republic of China” in 2004 both
fulfilled its WTO commitments in advance and introduced the registration system for foreign
traders, which created a more liberal foreign trade and business environment. In December
2011, the State Administration of Foreign Exchange and General Administration of Customs
signed a memorandum of cooperation to jointly promote foreign exchange reform for goods
trade, so that both sides could strengthen supervision and information exchange including
import and export declaration data of enterprises, other electronic data concerning the
receipt and payment for goods trading so that they can share data and effectively promote
2.1.1. Port efficiency in China
Since a port is the gateway to a country, port efficiency is an essential component in
ensuring national or regional economic development and social prosperity. With the
accelerating development of global economic integration and trade liberalization, efficient
port management and clearance procedures have increasingly become an important
indicator for measuring a country’s competitiveness. After years of effort, the modernization
of Chinese ports has greatly improved, particularly in the case of the coastal ports which are
now close to the advanced level found in developed countries. This is especially seen in port
construction as well as loading and unloading equipment.
According to data released by the National Bureau of Statistics of China, from 2005 to 2010
China’s investment in coastal port construction totalled more than RMB 350 billion, with a
number of large-scale, specialized ports having been built along the Yangtze River, the
Xijiang shipping trunk and the Beijing-Hangzhou Grand Canal. As of the end of 2010, there
were 96 ports above designated size and 32,148 berths for production, of which 1,659 were
able to handle ships of more than 10,000 metric tons (mt). Port berths have been developed
in a large-scale and specialized direction.
The container throughput of the ports above designated size was 130.6 million TEUs.
China’s port throughput has been the global leader for six consecutive years and port
construction has made remarkable progress. In 2011, the throughput at the top five Chinese
ports was 691 million MT at Ningbo Port, 620 million MT at Shanghai Port, 451 million MT at
Tianjin Port, 429 million MT at Guangzhou Port and 380 million MT at Suzhou Port.
In recent years, China Air Transport has also developed rapidly. The Civil Aviation
Administration of China signed air services agreements with 114 countries and regions at the
beginning of 2012, including 43 Asian countries and regions. China’s aviation transportation
enterprises have opened up 443 international routes and navigable cities have reached 125
around the world. Asian regional routes totalled 143 to just 29 Asian cities. China and
ASEAN member countries have opened up the third and fourth traffic rights, and close
communications have been maintained between China and North-East Asian countries –
including Japan and the Republic of Korea – in order to ensure that the bilateral air
transportation relationship is improved.
The “Port Law of the People’s Republic of China”, which came into effect at the beginning of
2004, adjusted the administrative system of the Chinese ports and established an
administration system that ports were administrated directly by the local governments and
separated government functions from commercial business. According to the National Plan
for Coastal Ports, which was jointly issued by Ministry of Transportation and the National
Development and Reform Commission in 2006, national coastal ports will be divided into five
groups – Bohai Rim, Yangtze River Delta, the south-eastern coast, the Pearl River delta and
the south-western coast – in terms of port situation in the region, transportation relations
among ports and the rationality of the main cargo transport. At the same time, the national
coastal ports have formed eight transportation systems for coal, petroleum, iron ore,
containers, food, commercial automobiles and passenger transport. Recently, coastal ports
have been gradually forming a convenient and efficient waterway system for passenger and
freight transportation, which has a rational layout, a clear structure, explicit functions and
resource saving features. The overall competitiveness of China’s coastal ports has
significantly improved, based on adaptation to the development of the country’s economic,
social, trade and defence requirements.
At present, most of the ports in China are attempting to use container tags and to implement
the intelligent management of container transport, which has greatly enhanced the efficiency
of container clearance and unloading, and the improvement of transportation security.
Together with the advancement of the China-ASEAN Free Trade Area and the continued
growth of trade in the region, shipping demand is growing, resulting in higher demand for
port services. The theme of the Seventh Conference of Ministers of Transport in September
2011 was “APEC security, stability and sustainable balanced development”, and
unanimously adopted by the Joint Ministerial Statement of the Seventh Asia-Pacific
Economic Cooperation (APEC) Transportation Ministerial Meeting. The Joint Declaration
encourages members to further strengthen cooperation in the field of transportation, and to
promote security, stability and sustainable growth of APEC transportation (APEC, 2004).
2.1.2. Reform and development of China’s customs procedures
Customs is a key department in China’s international trading. The efficiency of customs
clearance procedures will affect trade costs directly and extensively. Therefore, many
countries take active measures to reform their customs procedures in order to improve
international trade. Trade facilitation in China became more important after the 2008
economic crisis because many exporting firms were hurt financially. Therefore, the
Government makes easy policies to encourage private enterprises to invest in China and
other countries. A unified customs control could be of great benefit to China as this would
create a fair competition environment.
18.104.22.168. Reform of China customs procedures
The “Golden Customs Project”, officially launched in 2001, is aimed at promoting electronic
clearance in order to save time and costs. The core of “golden customs” comprises two
parts: (a) an internal clearance system; and (b) an external port electronic system. As an
important part of the “Golden Customs Project”, the China Electronic Port has established a
public data centre and data exchange platform that relies on the national public
telecommunication network. Based on the electronic data interchange (EDI) centre, the
customs network is connected with other government departments and enterprises such as
the industry and commerce departments, as well as the administration of taxation, foreign
exchange, quality control, transportation, banks and enterprises. It strengthens supervision
and management, improves the efficiency of trade, reduces trading costs, and is of great
significance to trade promotion.
In 2002, the Internet-connected big customs clearance system was implemented throughout
China. Cooperation between bonded shipment areas and ports was also officially launched
in the eastern coastal areas in 2004. This makes it possible to take full advantage of coastal
ports and bonded areas to speed up the flow of goods and increase trade efficiency.
In 2005, regional customs reform in China was launched with the goal of facilitating imports
and exports by integrating costal port and inland customs resources, standardizing and
simplifying customs procedures, and reducing the costs and improving the efficiency of
customs clearance. In October 2005, a trial inter-regional customs cooperation reform was
launched in 11 areas: the Yangtze River delta, Pearl River delta and Bohai Rim region as
well as Shanghai, Nanjing, Hangzhou, Ningbo, Guangzhou, Shenzhen, Beijing and Tianjin.
In April 2007, seven cities – Tianjin, Shanghai, Fujian, Qingdao, Ningbo, Guangzhou and
Shenzhen – jointly signed a “Customs Clearance Cooperation Framework Agreement
between Coastal Port Provinces and Inland Six Provincial Ports”. The agreement proposes
the establishment of a cooperation platform between central regions and the coastal areas,
and encourages innovating measures to simplify customs procedures and actively
implement a 24-hour reservation system. For exports “apply at origin, check in port” has
been introduced, which will save considerable time and costs.
22.214.171.124. International cooperation
Chinese customs authorities have established friendly exchanges with 117 countries or
regions. China has carried out extensive cooperation with ASEAN in capacity-building since
2003. In addition, the Chinese customs authorities continue to broaden cooperation, and
promote China-United States and China-European Union exchanges in traditional areas,
including law enforcement, statistics, country of origin requirements, technical cooperation
and trade facilitation as well as anti-terrorism efforts and protection of intellectual property
In addition, in order to promote the implementation of the World Customs Organization’s
(WCO) “International Trade Security and Facilitation Standards Framework”, China and the
European Union have jointly launched the “China-European Union Safe and Smart Trade
Lanes Pilot Programme” and the “Authorised Economic Operator (AEO)”, as well as
promoting China-European Union trade facilitation.
126.96.36.199. Reform of Ningbo bonded area
Reform of customs procedures is an important symbol of China’s commitment to
implementing trade facilitation. For example, after 20 years of exploration and development
of the Special Zone, the Ningbo bonded area has become an important window to China’s
opening up and development of an export-oriented economy.
The Ningbo Free Trade Area, which was approved by the State Council in November 1992,
is divided into three districts in the east, west and south, covering a total area of 2.3 km2. It is
the only bonded area in Zhejiang province. The region, which enjoys a policy of “exempt,
tax-free and bonded” and is supervised by the customs authorities, is one of the economic
areas of China where policy is most favourable and the opening-up level is at the highest
level. The bonded area has three main functions: import and export processing; international
trade; and warehousing and logistics. In order to adapt to the rapid development of foreign
trade, the Ningbo bonded area has implemented a series of reforms.
First, an application information management system has been developed for the customs
area of Ningbo bonded area plus a Ningbo Export Processing Zone Customs information
technology-assisted management system, a Ningbo Bonded Logistics Park information
management system and other related systems. Ningbo is the first to implement a regional
information management model among all the bonded areas in China. The regional “e-
Customs” plays other roles too. Through these systems, goods, enterprises and the whole
area are under the effective monitoring of the customs authorities. With this foundation, the
area has been able to integrate and upgrade new information management systems for
special supervised areas as well as accelerate the establishment of a smart card port
clearance system, plus a carefully implemented “wise park” combined with a monitoring,
clearance and information centre. Thus enterprises in the area can undertake all types of
Table 1. Facilitation measures in the Ningbo bonded area
Department Main content
Implement the integrated application, collection,
inspection and quarantine, charge, and clearance model
in inspections and quarantine; pre-inspection for imports,
thus saving considerable inspection time; electronic
sampling of exports of electric appliances to save time
Implement online annual checks and improve its
Develop query system software for administrative licences
to save time for enterprises when registering and getting
the market access registration service.
Taxation Department Provide on-site service in the bonded area for enterprises
to process receipt issues, and an online application and
electronic taxation system to save time and taxation costs.
Other Launch a pilot linkage project for the bonded zones,
export processing zones and bonded logistics park zone
in China first. Then establish a convenient goods transfer
mechanism among customs offices in different areas.
In order to support the restructuring and development of a regional “bonded economy”, the
Ningbo bonded area has also developed special regional clearance guidelines, and actively
assists the bonded area administrative committee to attract investment. It also creates a
special channel for local and special products, implements on-site inspection services,
strongly supports enterprises in expanding goods exhibitions, and implements priority for
declaration and clearance of imported wines and fruit in hot weather, thus creating a good
In establishing the international trade demonstration area, the Ningbo bonded area gained
strong support from many related government departments in establishing national
inspection, foreign exchange, and business and the taxation as customs special supervised
areas (table 3).
The Ningbo Free Trade Area customs authorities have introduced and reformed customs
procedures to enable paperless customs clearance, centralized declarations, advance
declarations and classification clearance among other measures.
The average time for import clearance has been reduced from 10.2 hours to 7.7 hours, while
export clearance has been lowered from 51 hours to 43.6 hours, thus saving time by about
20 per cent. Regulatory models are being optimized, to establish powerful regional electronic
customs procedures and enhance the level of trade facilitation.
2.1.3. Development of the Chinese institutional environment
Since joining WTO in 2001, China has greatly strengthened its trade-related legislation. In
2004, the Foreign Trade Law was revised and international trade was liberalized. The rights
and obligations of foreign traders are clearly defined and protected, and the import and
export environment has been greatly improved. In accordance with WTO rules, China has
revised and improved related laws and regulations, including the trade remedy system,
customs supervision, and the import and export inspection and quarantine system
In order to improve the fair competition environment, the Government of China has also
enhanced the competition-related laws and regulations, including the Anti-monopoly Law,
Anti-unfair Competition Law, Price Law, Advertising Law, Product Quality Law, Patent Law
etc. Several laws have also been enacted and implemented for protecting intellectual
property rights (IPR), including the country’s patent, trademark and copyright laws.
China’s customs authorities have established a perfect IPR enforcement system, including
declaration auditing, inspection of imported and exported goods, detention and investigation
of goods that infringe IPR, punishment for illegal imports and exports, and the disposal of
such goods. In October 1995, China promulgated and implemented the Customs Protection
of Intellectual Property Rights Regulations; then, in December 2003, these regulations were
revised and the customs authorities were given more rights to punish illegal trade.
With regard to international cooperation on IPR protection, China actively participated in, and
fulfilled the requirements of international protection of IPR conventions and treaties. Since
joining the World Intellectual Property Organization (WIPO) in 1980, among more than 10
international conventions China has successively joined the Paris Convention for the
Protection of Industrial Property, the Patent Cooperation Treaty, the Locarno
Agreement Establishing an International Classification for Industrial Designs, the Madrid
Agreement Concerning the International Registration of Marks, and the Trade-related
Intellectual Property Rights Agreement,..
The information of Import and Export management are published in the International
Business newspaper. The Customs General Administration Office publishes China customs
statistics, while customs regulations, import and export tariff rates, and customs procedures
are published in the Bulletin of the State Council and other media sources.
2.1.4. Development of E-commerce and the formulation of related laws
188.8.131.52 Development of e-commerce
E-commerce in China has been developing rapidly since 2002. In many sectors, such as
production, trade, transportation, finance and tourism, e-commerce is playing an ever-
growing important role. Cross-border e-commerce is gaining more attention. Online
purchases and sales by large enterprises are increasing, year by year. The e-commerce of
small and medium-sized enterprises (SMEs) is also increasing rapidly, with the useage rate
of online trading and marketing having reached 42.1 per cent in 2010. Online retail
transactions are rising rapidly, with the average annual growth rate reaching 100.8 per cent
between 2005 and 2010; in addition the share of total social retail sales of consumption
goods is increasing year by year. The value of the online retail market reached RMB 192.4
billion in the second quarter of 2011; during the first half of that year, online retail
transactions reached RMB 370.7 billion, an increase of 74 per cent compared with the same
period in the previous year.
During the development of e-commerce, the related support systems have also advanced
rapidly. From 2005 to 2010, the development of support systems such as the e-commerce
platform service, credit service, e-pay, modern logistics and e-certification all accelerated.
Related enterprises serving e-commerce, such as e-commerce information, transactions and
technologies, are emerging; by 2010 the number reached 25,000. E-commerce information
and the transaction platform are becoming more and more professional and integrated. The
improvement of the social credit environment also contributes much towards credible e-
commerce transactions. New payment service systems, such as online payment, mobile
payment and telephone payment, are growing rapidly; in fact, the size of the third-party e-
payment grew by nearly 60 times from 2005 to 2010. Meanwhile, modern logistics are
developing rapidly during the expansion of e-commerce.
The rapid growth of e-commerce also benefits from the continuously improving economic
circumstances. During the eleventh five-year period (2005-2010), the network infrastructure
in China improved continuously with user numbers growing rapidly; by 2010 the Internet
penetration rate had reached 34.3 per cent. In the same year, the total number of Internet
users reached 457 million while the number of mobile phone users reached 859 million, of
whom 47.05 million were 3G users. With the improvement of Internet services, user fees are
gradually being lowered.
184.108.40.206. Policies to promote the development of e-commerce
In order to improve the development of e-commerce, the central Government has
introduced a series of policies and regulations (table 2). With the new policies, laws and
regulations on e-commerce in place, the e-commerce development environment is gradually
emerging. The environment for e-commerce development is therefore becoming mature.
In summary, although China’s trade facilitation has made great progress, it is still in its early
stage. Compared both globally and with Asia, China’s trade facilitation level is relatively low,
and a big gap remains with developed countries in many aspects (e.g., the overload runs of
ports, poor transparency of policies and the unbalanced development of e-commerce). The
positive side of this situation is that China has great potential for improving its trade
Table 2. E-commerce policies and regulations of China
Data source: summarized by authors based on On-line information.(The Central People’s Government of People’s Republic of China, http://www.gov.cn/)
Date File name Issues
Electronic Signature Law of the
People’s Republic of China
First law on information technology area to ensure security of electronic transactions, promote
development of e-commerce and e-government in the legal system; create a favourable legal
environment for e-commerce security certification, provide a foundation for a network trust system
and electronic certification services sector.
Opinions on accelerating the
development of electronic
commerce by the Office of the
Put forward five basic principles to speed up the development of e-commerce, i.e. five
combinations – government and enterprise, environment creation and application extension,
network economy and real economy, key points and overall development, the acceleration of
development and strengthen of management.
Regulations on the Internet
transaction platform service
First industry standards in China’s e-commerce field to regulate e-commerce transactions, clarify
rights and responsibilities of the traders, establish trade rules, and improve reliability and trust of e-
National development strategy on
Put forward an Action Plan for e-commerce development to create environment, improve policies,
speed up establishment of credit, certification, standards, payment and logistics, and improve the
information clearing system; explore the multi-level and wide range of the e-commerce
The eleventh five-year plan on
Clarify the position of e-commerce and overall goals of e-commerce development in China; put
forward the specific goals of e-commerce development from four aspects – to improve the level of
e-commerce, foster the e-commerce service system, enhance the innovation ability of enterprises
and improve the supporting environment.
The twelfth five-year plan on
Put forward the overall goals of e-commerce during the twelfth five-year development, further
promote them in 2015, improve contributions to the national economy and social development,
increase the proportion of e-commerce in the modern service industry, perfect the e-commerce
system and form a network business environment
3. China-ASEAN cooperation and trade facilitation practices
On 4 November 2002, the leaders of China and the 10 ASEAN countries signed the China-
ASEAN Comprehensive Economic Cooperation Framework Agreement, which decided to
implement the “early harvest” programme from 2004 in advance in order to reduce and
cancel tariffs on 600 types of agricultural products. In 2003 China and ASEAN officially
launched customs cooperation, and in recent years have made great achievements due to
the efforts of both sides. A regular department consultation mechanism and expert customs
coordination commission (CCC) have been established to promote the rules of origin
negotiations between China and the ASEAN Free Trade Area.
On 29 November 2004, the Trade in Goods Agreement was signed, under which about
7,000 tariff lines were to be reduced from 20 July 2005. In 2009, China’s tariff average on
trade with ASEAN countries dropped to 2.4 per cent. In October 2009, at the China-ASEAN
Customs and Business Cooperation Forum, the delegates signed the Nanning Initiative of
China-ASEAN Trade Facilitation, and agreed to strengthen cooperation between China and
the Free Trade Area countries. On 1 January 2010, the China-ASEAN Free Trade Area was
fully established, and bilateral economic and trade relations entered a new stage.
The China-ASEAN Economic and Trade Cooperation Report (2010-2011) showed that China
had become the third-largest trading partner of ASEAN and that ASEAN was China’s fourth-
largest trading partner. Economic and trade activities between China and ASEAN countries
are strongly complementary. With this expansion of China-ASEAN trade and economic
relations, the reduction and elimination of obstacles to trade, the reduction of transaction
costs and the establishment of an efficient trade facilitation system have become important
3.1. Impacts of ASEAN trade facilitation on Chinese trade
ASEAN trade facilitation measures comprise two main characteristics. First, the ASEAN
countries are emphasizing business partnerships and cooperation. The ASEAN customs
authorities are taking the following measures to improve trade facilitation: (a) establish a
single customs window to provide services and coordination between each member country;
(b) standardize the trade declaration form among ASEAN members; (c) introduce electronic
customs procedures to save time and reduce costs of customs clearance; and (d)
standardize the commodity classification and valuation systems, in order to simplify ASEAN
taxation regulations and promote customs transparency, stability and consistency. Following
years of effort, the customs clearance time has been greatly reduced from several days to
two hours. The Green/Fast Channel makes rapid customs clearance possible for a Common
Effective Preferential Tax (CEPT).
Second, ASEAN members have established a standard and consistent system; under this
system international standards and quality management are applied. About 20 products,
mainly electrical equipment have met the requirements of 59 related international standards.
Seven unified standards and regulations for make-up technology have been formulated and
put into effect. Public technical standards for medicine have also been established and
implemented. Mutual Recognition Agreements can reduce repetitive detection and
certification processes, thus reducing trading time and costs.
The trade facilitation measures taken by ASEAN have enabled China to become its biggest
trade partner during the past three years. By the first half of 2012, ASEAN had invested
US$ 4.55 billion in China at an annual growth rate of 27.5 per cent. Direct investment in
China from ASEAN also increased to US$ 73.8 billion by the end of June 2012, accounting
for 6 per cent of China’s total foreign investment. China’s border cities of Yunnan and
Guangxi make full use of their advantageous locations, and benefit considerably from trade
Trade between Yunnan and ASEAN members has an extensive history, and Yunnan has
long been the trade frontier between China and South-East Asia and South Asia. The China-
ASEAN Free Trade Area and Great Mekong Subregion (GMS) economic corridor give
Yunnan favourable developing opportunities. Before the Kun-Man (Kunming-Bangkok)
highway was constructed, Yunnan exported vegetables and fresh-cut flowers through
coastal ports; this meant that vegetable- and flower-producing companies had to rely on
intermediate firms. As a result, a large part of profits went to the latter companies. However,
since the opening of the Kun-Man highway in 2008, vegetables and flowers can be shipped
directly to ASEAN with most of the profit going to the producers. Yunnan also exports non-
ferrous metal, electrical and agricultural products and electricity to ASEAN, and imports
wood, tropical fruit, seafood and handicraft products from ASEAN with low or no customs
duties. As a result, bilateral trade and investment between Yunnan and ASEAN has rapidly
In general, trade facilitation has produced extensive benefits for Yunnan. For example, it
previously took seven to eight days to ship fresh-cut flowers from Kunming to Bangkok;
however, following the construction of the Kun-Man highway, shipments now take only three
days. The transportation cost has also been reduced from RMB 7 to RMB 3. These
improvements are due to the high efficiency of customs officials, standardized and unified
inspections and quarantine, and convenient transportation.
Yunnan’s electronic port system was initiated in June of 2009, enabling members to share
information between different regions, sectors and industries; as a result, customs clearance
is made more convenient and faster. Customs clearance can be completed within 30
seconds at the key national electronic Red River port, whereas in the past it took about 10
minutes. This has allowed the trade flow of goods to increase by four to six times. In
addition, import and export costs have been reduced, helping to improve trade.
Pingxiang in Guangxi province has become one of the largest fruit import and export
distribution centres. A logistics park for the China-ASEAN Free Trade Area was set up and
the Pingxiang Integrated Free Trade Zone (bonded area) was established in 2011. Customs
clearance is becoming more convenient.
3.2. Impacts of Chinese trade facilitation on ASEAN trade
China has given a commitment to improving the general administration of customs to boost
trade facilitation with ASEAN in three areas:
(a) Strengthening cooperation and communications, the promotion of standard and
unified customs supervision, co-operation in law enforcement and information exchange;
(b) Building a strategic cooperative partnership with ASEAN, related governments and
(c) Taking into consideration proposals on trade facilitation in WTO negotiations as
well as actively promoting trade facilitation.
Currently, various measures are being taken by the Chinese customs authorities to promote
convenient customs clearance for ASEAN goods. At Shenzhen, which is one of the main
import centres for ASEAN goods, customs authorities now use an automatic clearance
system. Following the implementation of this system, the clearance time for vehicle imports
has been reduced from about two minutes to five seconds, which represents an increase of
more than 20 times in efficiency.
In 2010, the customs service at Pingxiang Port and Dongxing Port of Guangxi autonomous
zone began an online one-station clearance service as well as implementing preferential and
convenient measures for imports and exports, and introduced a round-the-clock, no-holiday
service and 24-hour application system. This has greatly reduced transaction costs and
improved the development of trade between Guangxi and ASEAN.
Benefitting from formal cooperation between China and the ASEAN Free Trade Area as well
as the implementation of China-ASEAN trade facilitation measures, in 2011 ASEAN became
China’s third-largest trading partner and source of imports. Bilateral trade between China
and ASEAN reached US$ 362.85 billion in 2011. Compared with the low, decreased or zero
growth of Chinese trade with other countries, bilateral trade between China and ASEAN has
maintained a growth rate of 9.2 per cent. From January to June 2012, China-ASEAN
bilateral trade amounted to US$ 187.82 billion,with an annual growth rate of 9.8 per cent,
which is higher than the total foreign trade growth of China. Bilateral investment between
China and ASEAN accumulated nearly US$ 93 billion. ASEAN has become an important
destination of overseas investment by Chinese enterprises now. The major pattern of China-
ASEAN Free Trade Region economic and trade cooperation is changing, such as the shift
from the rapid growth of bilateral trade to bilateral investment.
In recent years, the trade surplus of ASEAN countries with China has increased significantly.
For example, in 2001 Malaysia’s trade surplus with China was US$ 2.98 billion and it
continued to rise in each subsequent year to reach US$ 26.64 billion in 2010, which
represented an increase of 792.63 per cent for that period (table 5). Thailand’s trade surplus
with China in 2001 was US$ 2.37 billion, rising to US$ 13.45 billion in 2010, an increase of
466.4 per cent. Trade between the other ASEAN members and China also increased
According to the Thai Bureau of Statistics, since the R3 highway was opened in April 2011,
fruit exports from Thailand to China have increased by 100 per cent, with the trade value
reaches more than Baht 722 million.
The 1,104-km R3 highway, which links Thailand’s Chiang Rai port with Boten port in the Lao
People’s Democratic Republic and Mohan port of Yunnan province of China, has reduced
transportation times to two or three days. The fresh fruit is distributed directly through the
Yunnan market to south-western China, which is more convenient compared to the former
distribution channel through the Guangzhou market.
China has also become Myanmar’s largest trading partner. Myanmar Statistical Bureau data
show that, from 2011 to 2012, the value of Myanmar’s trade with China reached US$ 5.001
billion, of which imports from China accounted for US$ 2.786 billion and exports to China
amounted to US$ 2.214 billion. Currently, 215 investment projects are underway in
Myanmar. Fourteen of the projects with a total of some US$ 13.87billion are by Chinese
investors, placing them at the top of the investment list.
According to Viet Nam’s customs statistics, that country’s exports to China totalled US$ 6.1
billion during the first half of 2012. The main Vietnamese export commodities were: cassava
and its products (US$ 700 million); natural rubber (US$ 576 million); rice (US$ 459 million);
cashew nuts (US$ 120 million); aquatic products (US$ 110 million); fruit and vegetables
(US$ 90 million); and wood and wood products (US$ 56 million).
In the first half of 2012, Chinese investment in ASEAN totalled US$ 1.488 billion, an increase
of 34.3 per cent over the same period in the previous year. Chinese investment in ASEAN
has been broadened to include construction, hotels, and the electrical, mining and
transportation industries. At the same time, ASEAN investment in China has been steadily
On 12 July 2012, at the East Asia Summit of Foreign Ministers in Phnom Penh, China’s
Foreign Minister Yang Jiechi stated that: “Transportation and communications are the focus
of the Government of China [in order to] to improve cooperation between China and ASEAN,
and China therefore will establish a Fund for China-ASEAN Investment Cooperation, the
overall amount of which will reach US$ 10 billion to support ASEAN’s infrastructure
The investment projects include transportation, information and communications technology.
In July 2011, the China-ASEAN Fund completed its equity investment in Thailand’s largest
port of Laem Chabang. In March of the same year and in June 2012, the China-ASEAN
Fund invested in Cambodia’s optical fibre communications network in order to assist the
development of intraregional fibre-optic network and related businesses in the Indo-China
Peninsula. In December 2010, the first investment by the China-ASEAN Fund was the
purchase of the Philippines’ largest and second-largest shipping companies.
The cooperation between China and ASEAN is comprehensive, involving not only trade,
investment and technology cooperation, but also finance, culture, aviation, tourism,
telecommunications, transportation, shipping and environmental protection, all of which have
achieved remarkable progress.
The above analysis shows that international cooperation and trade facilitation measures
between China and ASEAN members promote foreign investment, trade and economic
Table 2. Imports and exports of China and 10 ASEAN members, 2003-2010
(Unit: US$ million)
Country 2003 2004 2005 2006 2007 2008 2009 2010
Singapore 19 348.62 26 682.07 33 146.86 40 857.91 47 143.98 52 477.07 47 855.87 57 075.98
Malaysia 20 127.22 26 260.80 30 699.56 37 109.50 46 386.26 53 556.57 51 967.69 74 248.84
Thailand 12 654.75 17 342.09 16 787.28 27 726.49 34 638.12 41 293.09 38 190.82 52 937.02
Indonesia 10 228.95 13 472.09 16 787.28 19 055.45 24 997.82 31 516.05 28 388.76 42 750.28
Philippines 9 399.52 13 328.16 17 557.32 23 412.69 30 615.76 28 636.98 20 539.00 27 762.23
Viet Nam 4 639.45 6 742.02 8 196.74 9 949.44 15 117.58 19 858.45 21 045.18 30 086.08
Myanmar 1 079.74 1 145.38 1 209.25 1 460.07 2 077.84 2 625.32 2 900.12 4 442.07
Cambodia 320.65 481.70 563.34 732.85 933.99 1 134.37 944.15 1 440.97
Lao PDR 63.96 109.44 113.53 128.93 218.37 402.37 751.80 1 085.12
346.26 298.95 260.87 314.94 358.76 219.43 422.44 1 031.94
Source: Based on the People’s Republic of China Statistical Yearbook.
Table 3. Trade balance of China with 10 ASEAN countries
(Unit: US$ million)
China to the
-131.08 170.81 -1 051.53 12.60 -2 984.95 363.16 -324.91 649.36 -2 375.40 -2 137.40
-220.79 227.01 -1 081.90 46.95 -4 322.09 587.86 -1 174.92 -62.34 -2 642.25 2 032.49
-278.48 268.65 -1 264.99 44.66 -7 845.60 740.70 -3 214.14 -1 621.08 -4 998.93 1 726.03
-203.17 421.84 -959.25 87.04 -10 088.68 731.50 -4 790.72 -1 306.87 -5 738.93 1 778.04
-154.59 508.72 -86.64 88.23 -9 486.86 660.45 -8 182.06 117.66 -12 172.59 3 091.06
-115.68 662.67 -156.03 77.83 -10 035.36 954.77 -11 936.43 5 512.67 -8 198.37 4 977.28
-133.40 831.86 204.85 119.07 -11 007.84 1 321.56 -15 619.92 12 096.61 -10 691.26 8 665.02
41.66 1 056.71 2 870.18 133.85 -10 646.23 1 330.22 -10 372.51 12 134.55 -10 020.39 10 785.81
141.55 870.37 1 052.30 2.54 -12 704.14 1 607.86 -3 357.82 12 248.01 -11 619.80 11 550.12
-296.72 1 253.71 1 156.85 -117.87 -26 644.76 2 508.97 -4 681.71 7 618.48 -13 454.86 16 117.00
Source: Based on the People’s Republic of China Statistical Yearbook.
4. Impacts of trade facilitation on poverty
4.1. Impact of trade on poverty
Increase trade is one of the main channels through which trade facilitation benefits the poor.
Based on the methods of Shenggen Fan et.al (2002), in this study trade is incorporated into
the model for building a system and studying the contribution of trade to poverty reduction by
using provincial panel data for China from 2000 to 2008. The other factors affecting rural
poverty reduction are also analysed in the models. For the details of the system model, see
4.1.1. The effects of agricultural imports on poverty
From the national perspective, elasticity of agricultural imports on poverty reduction is
negative, which indicates that an increase in agricultural imports would worsen rural poverty
in China. The elasticity of agricultural imports on poverty reduction is -0.05 (table 5), i.e., if
agricultural imports increase by 1 per cent, the rural poverty index in China will increase by
0.05 per cent.
From the regional perspective, the marginal effects of agricultural imports on rural poverty,
from high to low, are central, east and west. A large part of rural incomes in the central
regions is derived from agriculture; therefore, farmers in the central region are affected to a
great extent by agricultural imports.
Table 4. Elasticity of agricultural imports on poverty reduction
National Eastern region Middle region Western region
Elasticity on poverty
-0.0500 -0.0559 -0.1454 -0.0228
Elasticity on agricultural
-0.0166 -0.0185 -0.0482 -0.0076
2 The model is based on a research project, “Trade liberalization and poverty reduction – a case study
of China and ASEAN countries”, which was funded in 2010 by the International Poverty Reduction
Centre in China. The project studied the impacts of trade on poverty in detail.
4.1.2. The effects of agricultural exports on poverty
Nationally, the elasticity of agricultural exports on poverty reduction is 1.03 (table 6), which
indicates that the increase in agricultural exports has had a positive effect on the alleviation
of rural poverty in China; i.e., if agricultural exports increase by 1 per cent, then China’s rural
poverty index will decrease by 1.03 per cent. Output elasticity of agricultural exports is
positive and the increase in agricultural exports raises farmers’ income, so that they increase
their agricultural production.
Table 5. Elasticity of agricultural exports on poverty reduction
National Eastern region Middle region Western region
Elasticity on poverty
1.0300 0.3779 2.1160 0.5921
Elasticity on agricultural
0.0825 0.0303 0.1695 0.0474
From the regional perspective, the marginal effects of agricultural exports on rural poverty,
from high to low, are central, west and east. Agricultural exports have the greatest impact on
rural poverty reduction in the central region, the main reason being that a large part of rural
income in the central region is from agriculture.
When putting agricultural imports and exports together, the elasticity of net agricultural
exports on poverty reduction is still positive, indicating that agricultural trade can help to
reduce rural poverty in China. Trade liberalization also has positive effects on rural poverty
reduction in China.
4.2. Impacts of trade facilitation on poverty: A case study of the manufacture industry
and port efficiency
The impacts of trade facilitation on poverty reduction can be derived based on “trade
facilitation on trade” and “trade on poverty”. However, due to the difficulty in measuring trade
facilitation, especially with regard to customs procedures, regulations and e-commerce, the
case study here is mainly on port efficiency, with the manufacturing industry results being
used to analyse the impacts of port improvement on poverty reduction.
Zongying Sun (2009) tested the elasticity of port efficiency on trade,3 the results of
which have been used by the author together with the results of elasticity of trade on poverty,
3 A 1 per cent increase in port efficiency results in an increase of 1.07 per cent in exports and 1.02 per cent in
to calculate the elasticity of port efficiency on poverty reduction (table 7).
Table 6. Results of elasticity of ports on poverty
Imports Exports Overall
Results of elasticity of ports on trade 1.02 1.07 -
Results of elasticity of trade on
National -0.0500 1.0300 0.9800
Eastern region -0.0559 0.3779 0.3220
Middle region -0.1454 2.1160 1.9706
Western region -0.0228 0.5921 0.5693
Elasticity of port on poverty reduction*
National -0.0510 1.1021 1.0511
Eastern region -0.0570 0.4044 0.3473
Middle region -0.1483 2.2641 2.1158
Western region -0.0233 0.6335 0.6103
* Due to a lack of data, the effect of elasticity of ports on poverty reduction is simply multiplied by “elasticity of
ports on trade” and “elasticity of trade on poverty reduction”.
The results show that a 1 per cent increase in port efficiency results in a 1.051 per cent
decrease of the poverty index. In the middle region, the elasticity reaches 2.116 per cent
while it, is lower for the eastern and western regions. The major reasons are: (a) in the
eastern region the poverty problem has basically been solved, and the marginal contribution
of trade facilitation is small; and (b) the western region is mainly a mountainous area,
therefore the transportation system is not well-developed and its connections with
international markets are not as strong as those of the eastern or middle regions. Therefore,
the contribution of trade to the western region’s economic growth is not as high as the other
regions, and the effect of trade on poverty reduction is small.
5. Conclusion and recommendations
In summary, although China and ASEAN have made great progress in trade facilitation,
including port infrastructure construction, customs procedure reform, e-commerce
development as well as laws and regulations, the level of trade facilitation is still low
compared to that of other developed countries, and it is uneven in ASEAN countries.
Therefore, China should learn from the experience of countries with a high degree of trade
facilitation in order to enhance international cooperation to prompt trade facilitation and the
development of the national economy.
5.1. Impacts of trade facilitation on poverty reduction
It is easy to understand the mechanism of trade facilitation impacts on poverty reduction, but
the real situation is much more complicated than the theory. This is mainly due to the
dynamics and complexity of trade facilitation as well as the complexity of the reasons for
poverty and the impact channels between them.
Therefore the impact of port construction on poverty reduction is used in this study. The
results show that a 1 per cent increase in port efficiency results in a 1.051 per cent decrease
in the poverty index. For the middle region of China, elasticity is 2.116 per cent, but is less
for the eastern and western regions. This is mainly because in the eastern region the poverty
problem has basically been solved, and the marginal contribution of trade facilitation is small,
while in the mountainous western region, the transportation system is not well-developed
and its connections with international markets are not as strong as those in the eastern and
middle regions. Thus, the contribution of trade in economic growth in the western region is
not as high.
5.2. Enhancing capacity-building in trade facilitation
5.2.1. Promoting reform of customs procedures
In the global supply chain, customs clearance is the most important link. Burdensome and
inefficient customs clearance measures and poor infrastructure create high costs and make
corruption easy. Therefore, reform of customs procedures and the internationalization of
customs rules will be conducive to the development of trade facilitation. Some developing
countries feel that the costs of customs reform and modernization are too high and that there
are technical difficulties. However, the experience of Chile and Singapore shows that the
costs can be controlled, and that investment in trade facilitation is likely to bring a fast return.
5.2.2. Strengthening infrastructure construction for trade and investment facilitation
The improvement of physical infrastructure is an important component of trade and
investment facilitation. Among the ASEAN members, only in Singapore and Malaysia has
port infrastructure reached the advanced international level; however, in China and the other
ASEAN members the port facilities are not as high or even below the world average level.
Therefore China and ASEAN must focus on investment in infrastructure – especially ports,
airports and other related areas – and establish transportation systems that are compatible
with economic development. Meanwhile, cooperation between customs authorities must be
strengthened and customs procedures that meet international standards must be developed.
5.2.3. Improving development of e-business
The development of e-commerce in the ASEAN members is uneven. These countries need
to enhance the level of information availability and give greater importance to the
development of electronic commerce and its application in trade facilitation. Vigorous
development and further investment in the network infrastructure should be given higher
priority. At the same time, laws and regulations related to e-commerce should be improved.
5.2.4. Improve the institutional environment
Policy transparency should be further improved and policies should be stable and consistent.
On the one hand, the trade and investment administrative department should increase the
transparency of trade and investment policies. The laws and regulations concerning trade
and investment should be made available in official publications or on the government
websites; it can not be executed before publishing. On the other hand, approval procedures
should be simplified and standardized. Enforcement of laws should be enhanced. Finally, a
coordination mechanism for trade and investment facilitation should be established. The
related administrative departments should continue to expand dialogue with foreign
companies and formulate a new management model in order to achieve a “win-win” situation.
5.3. Enhance coordination between China and ASEAN in trade and investment
5.3.1. Promote unified standards
Adopting international standards is the simplest and most effective way of achieving trade
facilitation within China and the ASEAN members. With the rapid development of economic
integration in the China-ASEAN Free Trade Area, unified standards will play an increasingly
important role in the promotion of international trade and the establishment of technical trade
measures. China and the ASEAN members should attempt to base their domestic standards
on international standards, and adopt international standards in priority areas. Trade
agreements as well as domestic laws and regulations related to international standards
should be consistent within the China-ASEAN region.
5.3.2. Establish trade facilitation committees in China and ASEAN members
Trade facilitation involves wide areas and multiple sectors. Each country should establish an
institute to coordinate the different sectors. On the other hand, a fast and effective
coordination mechanism between countries should also be introduced. First, each country
should: (a) achieve efficient and detailed domestic information sharing; and (b) establish a
central database on trade facilitation and ensure data are updated regularly in order to
provide complete and accurate information. Second, each country should establish an
effective decision-making and information communications mechanism at the government
level. Finally, each country should: (a) establish a consultative mechanism with foreign trade
enterprises; (b) have a clear understanding of the issues involved and the impact of trade
facilitation; and (c) solve problems in trade facilitation in a timely manner.
In general, China and the ASEAN members should give more attention to: (a) the
establishment of a National Trade Facilitation Committee in the Doha Round negotiations; (b)
cooperation in promoting the development of trade facilitation; (c) improving the level of
China-ASEAN cooperation; (d) strengthening trade and investment cooperation partnerships;
and (e) joint promotion of extensive trade facilitation development.
APEC (2004). Trade Facilitation and Trade Liberalisation: From Shanghai to Bogor. APEC
Economic Committee, Singapore.
Shenggen Fan, Linxiu Zhang and Xiaobo Zhang (2002). “Growth, inequality, and poverty in
rural China-the role of public investments”, IFPRI Research Report No. 125. International
Food Policy Research Institute, Washington, D.C.
Junlan Shang and Ping Zhou (单君兰,周苹) (2012). “Impacts of trade facilitation on Chinese
exports – based on APEC’s evaluation” (Chinese language), International Business
Research, vol. 1.
Lin Sun and Xufei Xu (孙林,徐旭霏) (2011). “Trade facilitation in ASEAN countries and its
impacts on exports of Chinese manufacturing industry products” (Chinese language),
International Trade Problems, vol. 8.
Zhongying Sun (孙衷颖) (2009). “Trade facilitation of regional economic organizations”,
Dissertation Paper (Chinese language), Nankai University.
Juanjuan Xie and Jing yue (谢娟娟、岳静) (2011), “The empirical research on implication of
trade facilitation on China-Asian trade” (Chinese language), World Economic Research,
Model used to test the impact of various factors on poverty
In order to test the impact of various factors on poverty, a four-set and nine equations
system was formulated to analyse those factors, as follows. Equation (1) is a poverty
reduction equation that is used to quantify different variables in rural poverty reduction
contribution. The following factors were considered in the equation: agricultural GDP per
worker; non-farm employment rate; rural non-farm employment wage rate; relative prices of
agricultural produce; rural inflation rate; rural internal gap in income distribution; income gap
between urban and rural areas; and international trade in agricultural products.
In equation (1), the agricultural GDP per worker mainly reflects the effect that agricultural
output growth has on rural poverty reduction. Farmers’ agricultural income forms a large
proportion of their total income in the impoverished and backward areas of China. Off-farm
income is an important source of rural residents’ total income in China, and the wage level of
the non-farm workforce is introduced in the model to capture off-farm income. In addition, not
only can these two variables reflect the effect of non-farm sector wages change and
employment changes on rural poverty reduction, but they can also provide better policy
guidance for rural poverty reduction. If an improved rural wage ratio has a more significant
effect than increased non-farm employment opportunities on rural poverty reduction,
Governments should pay attention to improving the rural wage level, and conversely should
pay more attention to increasing non-farm employment opportunities.
( , , , , , , )PI f AGDPPC INFIAT WAGE NAGEMPLY INEQ ATT TRADE= (1)
The relative prices of agricultural products are mainly used to reflect the impact of relative
price changes on rural poverty. If the impoverished rural population is a net buyer of
agricultural produce, agricultural product price rises will cause a loss, but if the impoverished
rural population is a net seller of agricultural produce, agricultural product price rises will
provide a benefit. In the long term, agricultural produce price increases will lead to
governments and farmers increasing agricultural production investment, and will lead to the
total supply curve to shift upward. The rural gap in income distribution reflects the degree of
rural poverty while the income gap between urban and rural areas reflects the relative rural
poverty level, and the inflation rate reflects the economic environment’s impact on rural
poverty. International trade in agricultural products is demonstrated by imports and exports.
The following table shows the meaning of each variable in equation (1).
Definitions of exogenous and endogenous variables
Exogenous variable UCPI Urban CPI
ALAND Land area per worker TRADE Opening degree of trade index
AK Agricultural capital per worker AIMP Agricultural imports
NAK Capital per worker in rural
AEXP Agricultural exports
PWRE Government spending on rural
NAGDPR Rate of agricultural GDP to non-
GDP produced by urban sector NAKR Rate of rural per non-agricultural
to urban per capital
IRRE Government expenditure on
CPIR Rate of rural CPI to urban CPI
RDE Government spending on
Total power of agricultural
PI Percentage of rural population
EDUE Government spending on rural
SCHY Average years of schooling of
population 16 years and older
FERTI Agricultural fertilizer IRR Percentage of total cropped area
Government spending on rural
ELECT Electricity consumption
PLOAN Government expenditures for
alleviation per capita
WAGE Wage rate of non-agricultural
INFIAT Rural inflation rate
Percentage of non-agricultural
in total rural employment
Agricultural drainage areas AGDPPC Agricultural GDP per worker
LANDQ Soil erosion areas GAGDPP
Agricultural productivity growth at
LANDD Land disaster areas NAGDPP
Non-agricultural GDP per worker
Urban unemployment rate
ATT Terms of trade, measured as
Prices divided by a relevant
Non-agricultural GNP deflator
RCPI Rural CPI INEQ Income gap between urban and
Equation (2) is an agriculture production function. The dependent variable is the agricultural
GDP per worker while the independent variables include: (a) capital investment (land per
worker) and capital; technology; infrastructure; and education (all of which may help to
improve agricultural labour and productivity as well as result in the total supply curve moving
upwards); and (b) agricultural scientific research investment (R&D); planting areas; irrigation
rate; the rural population’s average years of education; rural disaster areas; soil erosion
areas; agricultural electricity supply; rural machinery; and agricultural products trading. All
these affect agricultural production and rural poverty reduction through the output effect.
Equations (3) and (4) are for rural off-farm sector wages and rural off-farm sector
employment, respectively. The two equations are a simplified form of supply and demand
under conditions of the labour market equilibrium. Labour and wages is the labour
productivity function. At the same time, labour productivity is the capital/labour ratio and
some elements that elicited the production curve outside shift function, including
infrastructure and education. The independent variables include the capital per labour,
infrastructure (water resources, electricity, education, training and irrigation), years of
education and the agricultural GDP in the previous year. Off-farm capital investment in rural
areas can promote non-farm productivity. An increase in the education level of workers can
also improve work efficiency. Rural power development is also beneficial to farmers’
entrepreneurship and improves agricultural productivity.
The work relief in the rural water conservancy project has great influence on non-farm
employment and non-farm wages. Agriculture is the foundation of both the national economy
and social development, and the lagged agricultural output determines the input in
agricultural product processing industry. The influence of non-farm sector productivity on
non-farm labour and non-farm wage levels is an important factor as it directly affects the
ability of the economic environment to absorb surplus rural labour. Opening to the outside
world and trade liberalization has played a direct role in promoting rapid economic growth in
China; therefore, international trade also has a very important influence on rural non-farm
labour and non-farm wage levels.
),,,,,,,( AEXPAIMPEMPLOYUGDPPCAGDPPCNAKSCHYNAEMPLYfWAGE = (3)
),,,,,,,( AEXPAIMPEMPLOYUGDPPCAGDPPCNAKSCHYWAGEfNAEMPLY =
Equation (5) reflects the allocation difference in urban and rural areas. The variables that
influence the allocation difference in urban and rural areas mainly include labour output
value per head orural population and urban residents’ income level, the amount of unit
labour own quantity in urban and rural areas, the ratio of the rural consumer price index to
the urban consumer price index, the process of urbanization, the urban unemployment rate,
domestic and international trade, and finance transfer payments in urban and rural areas. In
addition, the rural internal income gap is an important variable that affects rural poverty
reduction; however, it is very difficult to calculate the rural internal Gini coefficient because of
limited available data. So the factors having an impact on rural internal income distribution
appear to be the rural off-farm employment situation, the process of urbanization, domestic
and international trade, and financial transfer payments.
),,,,,,( EMPLOYAEXPAIMPATTCPIRNAKRNAGDPRfINEQ =
In conclusion, variables that need to considered in equation (5) such as agricultural GDP per
wroker versus non-agricultural GDP per wroker the ratio of rural and urban unit labour capital
quantity, rural CPI versus urban CPI, relative agricultural product prices, the unemployment
rate in cities and towns, and imports and exports of agricultural products.
Equation (6) reflects the relationship between planting area irrigation rate and government
irrigation expenditure while equation (7) reflects the relationship between the rural
population’s average number of years of education and government education investment.
Equation (8) reflects the relationship between rural electricity consumption andgovernment
expenditure on power supply.
Equation (9) deals with trade conditions, particularly the relative price levels of agricultural
and industrial products from the agricultural product supply and demand perspective. The
growth of agricultural GDP leads to increased supply of agricultural products that, in turn,
leads to decreases of agricultural product prices. The growth of GDP (exclusive of
agricultural GDP) leads to increased demand for agricultural products, which improves the
agricultural product trade environment. The growth of industrial output will be accompanied
by greatly improved demand for agricultural products, thus creating a gap in supply and
demand that is conducive to improved agricultural and industrial product trade conditions:
),...,,( 1 jIRREIRREIRREfIRR −−= (6)
),...,,( 1 nEDUEEDUEEDUEfSCHY −−= (7)
),...,,( 1 lPWREEPWREEPWREfELECT −−= (8)
),,( UGDPPCGGDPPCAGDPPCfATT = (9)
It is necessary to distinguish between internal variables and external variables in the
simultaneous equation estimate model, for which the table above shows the specific
In order to understand the specific region of the fixed effects, and through the virtual
variables, the impact of trade liberalization on rural poverty reduction in the eastern, central
and western regions of China can be measured and compared. By totally differentiating
equations (1) to (9) it is possible to obtain the marginal impact and elastic ties of different
types of government expenditures on growth in agricultural and non-farm productivity as well
as on reductions in regional inequality and rural poverty.
For growth effects the marginal impact of R&D investment in year t-1 on agricultural labour
productivity in year t can be derived as:
( ) i
RDE RDE− −
Equation (10) measures the direct impact of investment in research on agricultural
productivity growth. By aggregating the total effects of all past government expenditures
during the lagged period, the sum of the marginal effects is obtained for any particular year.
Returns to other variables can be derived in a similar way.
For poverty effects, the impact of government investment in agricultural R&D in year t-i on
poverty at year t can be derived as:
i i i
P P AGDPPC P WAGE AGDPPC
RDE AGDPPC RDE WAGE AGDPPC RDE
P NAGEMPLY AGDPPC P ATT AGDPPC
NAGEMPLY AGDPPC RDE TOT AGDPPC RDE
− − −
∂ ∂ ∂ ∂ ∂ ∂
∂ ∂ ∂ ∂ ∂ ∂
∂ ∂ ∂ ∂ ∂ ∂
∂ ∂ ∂ ∂ ∂ ∂
The first term on the right-hand side of equation (11) captures the impact of government
investments in R&D through yield-enhancing technologies, such as improved varieties, on
poverty and therefore agricultural labour productivity. Increased agricultural labour
productivity also affects poverty through changes in rural non-farm wages and employment,
and relative prices, which are captured in the remaining terms on the right-hand side of the
equation. As with government investments in agricultural R&D, the impact of government
investments in irrigation is captured through improved productivity, rural wages and non-farm
employment, and relative prices. Other variables have similar impacts on poverty.
The impact of government investments in rural electricity in year t-n on poverty in year t is
i i i
P P AGDPPC ELECT P WAGE AGDPPC ELECT
PWRE AGDPPC ELECT PWRE WAGE AGDPPC ELECT PWRE
P NAGEMPLY AGDPPC ELECT
NAGEMPLY AGDPPC ELECT PWRE
P ATT AGDPPC ELECT P WA
ATT AGDPPC ELECT PWRE WAGE
− − −
∂ ∂ ∂ ∂ ∂ ∂ ∂ ∂
∂ ∂ ∂ ∂ ∂ ∂ ∂ ∂
∂ ∂ ∂ ∂
∂ ∂ ∂ ∂
∂ ∂ ∂ ∂ ∂ ∂
∂ ∂ ∂ ∂ ∂ i
The first term on the right-hand side of equation (12) measures the direct effects on poverty
of improved productivity that is attributable to greater availability of electricity supply. Terms
2, 3 and 4 are the indirect effects of improved productivity through changes in rural non-farm
wages, employment and prices. Terms 5 and 6 capture the direct effects on poverty of higher
non-farm wages and greater non-agricultural employment opportunities arising from
government investment in electricity supply. Similarly, it is possible to derive the impact on
rural poverty of increased investment in roads, irrigation and education.
ARTNeT Working Paper Series
is available at www.artnetontrade.org
Economic and Social Commission
for Asia and the Pacific
Trade and Investment Division
United Nations Building
Rajadamnern Nok Avenue
Bangkok 10200, Thailand
Tel: +66 (0)2-288-2251