Types of players in the field

The granting of full trading rights to all enterprises registered in China will take place over time. Within the three-year transitional period, companies that deal in import and export will still need to have appropriate trading rights. Those who do not have rights to trade are not legally permitted to handle import or export contracts directly, although they can contract companies who have trading rights to carry out import or export on their behalf on a commission basis.

Developing an understanding of the various types of business structure in China is important to firms looking for import/export opportunities in this market, and can be critical to the success or otherwise of a foreign company's China business plan. The following seeks to outline the kinds of companies that foreign companies may encounter.

National foreign trade companies

National foreign trade companies are companies that are set up at the national level and were once affiliated with government departments. At the beginning of China's economic reform and opening up, foreign trade was virtually monopolised by 12 national foreign trade corporations under the then Ministry of Foreign Trade (now the Ministry of Foreign Trade and Economic Cooperation). With the deepening economic reform, other ministries governing different industries successively set up their own foreign trade functions, specializing in their particular product fields and known as 'industrial foreign trade companies.' Further government reform has resulted in separation of those national companies from their government affiliation and they have now become independent in their decision-making.

Table 2.6.3: Services subject to government guideline pricing

Service	Notes
Transport services charges	Including rail transport of both passenger and freight, air transport of freight, port services and pipeline transport.
Professional services charges	Including architectural and engineering services, legal services, assets assessment services, authentication, arbitration, notarization and inspection.
Charges for commission agents ' services	Including commission for trademarks, advertisement taxation and bidding agents.
Charges for settlement , clearing and transmission services of banks	Including settlement, clearing and transmission services of the RMB, transaction fees and seat charges of national securities exchanges, as well as seat charges for China Foreign Exchange Centre
Selling price and renting fee of residential apartments Health related services
Source: Ministry of Foreign Trade and Economic Co-operation, available in detail at www.moftec.gov.cn/table/wto/law09.doc

Being state-owned in nature, some have been publicly listed on the stock market. Although their role has been eroded by an increasing number of emerging companies that have acquired trading rights, they still enjoy the advantages of being close to central government decision-making and often act as the purchasing or selling agents of the government in the trade of products of national importance. Under the WTO arrangements, many of these companies are designated companies for products subject to state trading. On those non-state designated products (both import and export), they are now competing on most fronts with other forms of trading entities. Trading companies with 'China' or 'China National' in their business names are normally national (or state-level) foreign trade companies.

Provincial foreign trade companies

Provincial foreign trade companies were once subsidiaries of national foreign trade companies under the old foreign trade system. Even those companies set up by industrial ministries also had local representatives. Between 1988 and 1990, those provincial subsidiaries became independent of their national headquarters as part of government efforts to reform the foreign trade system. These companies have since assumed a leading role in the development of foreign trade in their respective localities.

Foreign trade companies at lower administrative level

Also at the city level are foreign trade companies with rights to trade internationally. They undertake the tasks of generating export earnings and act as import agents for both local government purchase and orders by local enterprises. At the county level, the foreign trade companies more often perform the role of export suppliers than independent import or export operators.

Large industrial enterprises with trading rights

In the late 1980s, the Chinese government decided to grant large state-owned enterprises trading rights limited to the export of their own products and import of products needed for their production. Many of these large enterprises have now become conglomerates or group companies under which are the trading functions of separate corporate entities. Some of those trading functions are no longer limited to import and export related to production, but dealing with a wider range of products in their import and export activities.

Foreign-invested enterprises

Foreign-invested enterprises include equity joint ventures, contractual joint ventures and wholly foreign- owned enterprises. At present, these foreign-invested enterprises are only allowed to import what is needed in their production and export what they produce. Three years after China's WTO accession , they will be permitted to deal in other products.

Research institutions

To encourage the export of locally developed technologies and development of local R & D capabilities, large research institutions that meet certain qualification requirements will be permitted to have trading rights, which were limited to their research-related imports and exports, but now are permitted to export products of not their own production.

Private enterprises

With the development of the private sector, many private enterprises have emerged as leading sources of export supply. In the late 1990s, the government decided to grant trading rights to private enterprises, again limited to imports and exports related to their production.